Chairman’s letter

To all shareholders,

The year 2013 was, for AngloGold Ashanti, a demanding period occasioned by significant change. The sharp decline in the gold price, the first since 2001, along with rising real prices of important inputs, hampered our efforts to recover from the unprotected strikes which affected our South African operations toward the end of the previous year.

The average gold price received for 2013 was 21% below the 2012 average. Whether this represented the beginning of a new bear market for gold or a correction that would be followed by the resumption of an upward trend depends on one’s view of US and global economic prospects and events, and the expectations and actions of global buyers.

This was the challenging environment in which our new Chief Executive Officer, Srinivasan Venkatakrishnan (better known as Venkat), and the executive team found themselves and they had little time to spare in formulating a response. The company’s leadership took urgent steps to restructure the organisation to enable it to survive and prosper at a gold price some way below that on which previous strategies had been based.

This gave rise to two initiatives, firstly, Project 500, a programme to sustainably remove $500m in operating costs over a period of 18 months and, secondly, a separate initiative to reduce corporate and exploration costs and optimise capital expenditure. Achieving these goals required a reduction of approximately 40% in the staff complement at corporate, regional and country offices. While absolutely necessary, this was a difficult and painful process.

An important challenge for management in the year ahead will be to restore morale that may have been negatively affected by the company-wide rationalisation, while re-engineering work systems to optimise efficiencies. In taking on this challenge, AngloGold Ashanti will ensure that its responsibilities as a good corporate citizen to all stakeholders and the physical environment are not compromised.

Sadly, eight of our colleagues lost their lives in accidents on our mines in 2013. I would like to convey our heartfelt condolences to the families, friends, communities and colleagues of Zithulele Makhayakuda, Palmer Nyathi, Mashalane Chaole, Mandisile Weduwedu, Mabhedane Mahlalela and Edwin Makhari of the South African operations and Kwame Mensah and Richard Aidoo in Ghana.

Putting safety first continues to be the number one priority of management and employees and we are determined not to rest until this policy achieves our objective of zero harm to our workforce. Our overall safety performance in relation to the broad all injury measure improved over previous years, while our fatal injury frequency rate was at a record low at the end of 2013, putting us a step closer to meeting our ultimate goal.

In 2013, the gold sector entered into biennial wage negotiations. Gold mining companies co-operated well under the auspices of the Chamber of Mines and agreement was reached after a three-day strike at our Vaal River operations and various other gold mining companies. In this regard, I must express appreciation that the National Union of Mineworkers (NUM), Solidarity and the United Association of South Africa (UASA) adhered to the spirit and intent of collective bargaining. In the same vein, I welcome the participation in the negotiations for the first time by the Association of Mineworkers and Construction Union (AMCU), although they are yet to sign the agreement.

Overall, we can be pleased at the outcome in these complex circumstances. After enduring a difficult period, the institutionalised system of centralised collective bargaining, which has served the industry well for almost three decades, was effectively applied during 2013.

In relation to capital projects, I am happy to report that construction of two new operations, Tropicana in Australia and Kibali in the Democratic Republic of the Congo (DRC), was completed at below cost. Both poured their first gold in the fourth quarter of 2013, ahead of schedule. These high-margin operations, which together are expected to produce between 550,000oz and 600,000oz for our account in 2014, will make a significant contribution to cash flow. In addition, the diminishing need for capital expenditure in relation to these projects will also have a beneficial impact on cash flow.

In early 2014, the company was in the final stages of completing the sale of its Navachab mine in Namibia. While it is difficult to sell assets in a bear market, the perseverance of our team, along with the recognition by the buyer of the underlying value of this asset in its portfolio, made the sale possible at a price that satisfied both parties. I commend the team on a job well done.

AngloGold Ashanti also continues to work toward realising the potential of a challenging but promising operation at Obuasi, which has a history of more than a century, in Ghana. The company remains of the view that, with strong focus and intent, this operation can be successfully turned around. The project to access higher-grade areas via a newly constructed ramp and the introduction of mechanised mining continues, with a tight rein being kept on capital costs. We will continue to review all options available to us in relation to this operation, taking into account the interests of all stakeholders.

As I mentioned earlier, to support Project 500 in achieving its target of major operational cost reduction, it was necessary to reconsider our exploration activities in more than a dozen jurisdictions and to maintain a focus on the most prospective locations in Colombia, Australia and Guinea. Each of these locations offers encouraging prospects for AngloGold Ashanti.

As we have previously noted, Colombia in particular has the potential to become a world-class gold mining region, both in terms of the magnitude of business potential and of the potential benefits for communities and the country as a whole. We do, however, face many challenges. For example, many citizens fear that commercial-scale mining will threaten scarce water resources. The challenge to AngloGold Ashanti is to offer credible reassurance that that will not be the case and to support that with actions that lend credence to these reassurances.

The executive also continues to focus its attention on sustainability, safety and security issues at our global operations and on efforts to improve relationships with surrounding communities. Sadly, there was an increase in the deaths of artisanal miners carrying out illegal work on our concession at Geita in Tanzania, while the theft of goods such as fuel has become an increasing challenge. We continue to work closely with the relevant authorities to help secure our mining properties in order to prevent access by illegal miners, which exposes them to a range of hazards to be found on an active, large-scale mine site.

An intensive investigation into the challenges in Tanzania has been followed by the implementation of a comprehensive set of programmes which, we hope, will bring positive results. One such project of which we are particularly proud is the construction of a water pipeline from nearby Lake Victoria, which should positively change the lives of the people of Geita village.

In South Africa, the work of the AngloGold Ashanti Technology Innovation Consortium (ATIC) has progressed. During 2013, a test site established at TauTona has experimented with reef boring and the application of ultra-high strength backfill. Results to date have been encouraging. A successful outcome will open up the potential for more efficient, deeper and safer mining that would change the face of gold mining – and other deep-level mining – in South Africa.

With respect to the board structure, I would like to welcome to the board Richard Duffy, who was appointed Chief Financial Officer in May 2013. Richard has had a long and distinguished career within the company and I wish him all the best in this new role. I thank Tony O’Neill for his stint, albeit a brief one, on the board during which he served as acting joint interim Chief Executive Officer before his departure.

I began this letter by referring to the severe challenges the company faced at the time of Venkat’s accession to the position, first as acting joint interim Chief Executive Officer, then to his permanent appointment in May. It would be remiss of me not to acknowledge the extraordinary job he has done in these circumstances in leading his executive team and the rest of the company to a position where the future is again filled with promise.

On 17 February 2014, Mr. Tito Mboweni informed the board that, given his increasing portfolio of professional commitments, he would not stand for re-election as a non-executive director. At the same time, he opted to stand down as Chairman. I would like to join the board in wishing him well in his future endeavours and thanking him for his service over the past four years. His guidance, together with that of the board, has been invaluable, particularly in navigating a time of intensive restructuring and refocus – needed in response to the sharp drop in the gold price – and in helping to facilitate the smooth transition in executive leadership in early 2013.

In a show of trust and confidence in me, I was unanimously elected by the board as Mr. Mboweni’s replacement. It is an honour and a privilege for me to represent AngloGold Ashanti’s shareholders in this capacity and to work with a group of experienced and accomplished fellow directors and with a seasoned executive team in their quest to safely and sustainably generate growth in free cash flow as we continue to lift the company’s performance. I give my assurance that the board and the management team will continue to look at new and better ways to improve the company’s value proposition for investors, in line with the commitment to enhance shareholder value.

I cannot complete this letter without paying my and the company’s respects to the departed former South African President, Nelson Rolihlahla Mandela. South Africa and her people are forever grateful for the service and moral leadership he gave to our country and, indeed, to the world.

Sipho Pityana
Chairman
18 March 2014