Managing our risks and acting on opportunities

In the complex and often unpredictable environment in which mining companies operate, effective risk management is central to business success. We have developed structures, standards, policies, guidelines, processes and protocols under our group risk management framework that allow us to identify, assess, respond to, manage and record risks. Our risk management framework allows us to monitor the potential risks and opportunities associated with uncertainty, societal and political transition, economic fluctuations, regulatory changes and operational and production risks in a proactive and systematic way through all areas of our business and by all levels of management.

The board and the Chief Executive Officer are committed to ensuring that risk is managed effectively through a system that involves identifying, assessing, evaluating, mitigating, monitoring, and managing significant risks and opportunities to ensure we meet our strategic business objectives.

Our group risk management framework aims to provide assurance that all material risks across the group have been properly assessed, mitigated, and monitored, within appropriate risk tolerance levels.

AngloGold Ashanti has a formal risk management policy and a comprehensive set of risk management standards. We adhere to the King IV Corporate Governance Risk Principles, ISO 31000 and the Committee of Sponsoring Organisations (COSO) Enterprise Risk Management Framework.

Role of the board, Audit and Risk Committee and management

The board provides oversight of AngloGold Ashanti’s risk management framework, policies and processes and has ultimate accountability for the development and implementation of the risk management strategy and plan.

The Audit and Risk Committee is accountable for risk governance and risk management system oversight, approving risk policy, determining the appropriate levels of risk appetite and tolerance and setting limits annually for these.

Management is responsible and accountable for effective risk management and practice.

The Chief Financial Officer is accountable for the enactment of the policy and reports to the Audit and Risk Committee and board. Assurance on the risk management system is provided by Group Internal Audit, which provides periodic evaluation of controls and compliance, as well as an objective view of delivery on the risk management process.

Our risks and opportunities are identified at an operational and regional level and assessed with input from senior management. They are reviewed quarterly, or more frequently if required, based on changes in our operating environment. Relevant risk owners are consulted to confirm the status of risks and opportunities in terms of their severity and likelihood, and to ensure alignment with regular independent assessments and assurance processes.

Risk management framework

This framework applies across the company and to all group-managed entities, covering the components below.

Governance

Responsibility delegated to the CEO for design, implementation, monitoring of a plan for a system and process of risk management

Board of Directors

Ultimate accountability

Oversight

Responsibility for risk management system oversight and a clearing house for risk policy, appetite-setting, governance

Audit and Risk Committee

Risk management system

Responsibility:

Management of risk
Support
Assurance

Management

Assurance

Lines of defence

Managing the risk:

Corporate, regions, exploration, operations
and projects

Identify risk, assess, evaluate, mitigate, monitor and report
Ensure compliance with policy and standards
Provide assertion on risk exposure
Risk reviews conducted through functional owners

Support the Board:

Audit and Risk Committee,
CEO and CFO

Executive team oversight
Regional oversight
Group risk management
Group compliance management
Group sustainability management
Group tax management
Legal

Business improvement frameworks
Lateral oversight through functional owners
Group planning, technical reviews and oversight
Group growth, exploration review and oversight

Independent evaluation:

Controls, compliance, and governance

Internal audit
External audit
Combined assurance reviews
ISO standards
Third party assurance

Governance and
steering committees

Risk appetite and risk tolerance

In conducting our business, a certain amount of risk is inevitable. AngloGold Ashanti defines risk appetite as the level and type of risk that the Group is willing to accept to achieve its business goals, while risk tolerance refers to the level of risk carried at a particular time. Both risk appetite and risk tolerance are critical elements of the Group’s risk management process and how risk management integrates with business planning and operational management. The board determines the appropriate levels of group risk tolerance and sets limits for risk appetite annually.

See Our Strategy, Delivering on our strategy and Our external operating context

Opportunities

While AngloGold Ashanti recognises that risk is present in all business and operational activities, we also understand that threats in certain scenarios can present opportunities.

Significant opportunities are:

Increasing Ore Reserve

Several opportunities exist in the ongoing development of the Ore Reserve – either by greenfield discoveries or conversion from our Mineral Resource – which is key to the long-term sustainability of the business. Through a targeted investment programme started in 2020, our exploration teams added 2.7Moz of Ore Reserve, net of those depleted by production, and anticipate another net increase in 2021 as this programme continues. For more details see Mineral Resource and Ore Reserve – summary in this report.
New project development

Investment decisions on the two Colombian projects are expected in the coming year. These projects are the wholly owned Quebradona copper-gold project and the Gramalote joint venture (50:50) with operator B2Gold. Once in production, these projects, which are low-cost and have long operating lives, will substantially reduce AngloGold Ashanti’s cost profile with increased margins and cash generation, while also enhancing our life-of-mine profile with medium- to long-term production and total Ore Reserve, maintaining long-term optionality.
Commodity diversification

As a copper-gold project, Quebradona will diversify the range of commodities produced. Copper is essential to renewable energy and electric vehicle technologies, among others. As the world moves towards decarbonisation and reduced emissions in the face of the climate crisis, global demand for copper is expected to increase.

Managing risk during the COVID-19 pandemic

As the COVID-19 pandemic swept around the world, AngloGold Ashanti demonstrated real-time risk management and the ability to respond quickly to the resulting challenges, adapting and innovating processes in reaction to the changing COVID-19 environment across its operating regions. Decision-making at all levels was streamlined through our crisis management processes, which had as a centrepiece a multi-disciplinary daily crisis meeting across all operations. This meeting allowed for rapid sharing of information, which was vital as the spread of the virus accelerated, and also equally efficient sharing of emerging best practice and solutions to challenges across our sites. All of these mitigation measures from the risks that had been highlighted, were carefully logged and followed through to resolution.

Government-imposed lockdowns forced certain mines to suspend operations at different stages, and for different periods of time during the year. We worked to ensure business continuity while prioritising the health and safety of our employees and host communities. We quickly put in place protocols and standard operating procedures for all sites to help prevent the transmission of the virus. Our teams worked closely with community leadership around our mines and governments in our operating jurisdictions, to provide support for efforts to ‘flatten the curve’ and cushion the economic impact of the pandemic.

Guidance was suspended in March and reinstated in September, once there was a greater degree of certainty in our ability to manage our operations during conditions created by the pandemic.

As the virus spread around the globe, disrupting supply chains, a concerted effort was made to increase inventories of critical spares and consumable inputs at our operations. In addition, as the threat of mine closures became a reality in Brazil, South Africa and Argentina, we worked to ensure adequate liquidity in the event of protracted and more widespread production stoppages across our portfolio. This was especially important given that our $700m, 10-year bond came up for maturity in April 2020, which we had elected to pay from existing credit facilities and cash on hand.

We drew down fully on our $1.4bn revolving credit facility and put in place a short-term, $1bn emergency credit facility, to ensure adequate liquidity as the extent and impact of the pandemic became clearer. As the gold price rose through the course of 2020 and free cash flow improved as a result, cash balances were bolstered and later supplemented by the issue of a new, $700m 10-year bond at a lower coupon than the one settled in April, and the $200m initial proceeds from the sale of our South Africa assets. In addition we received $39m of the initial proceeds from the sale of Sadiola, the dividend paid by Sadiola, and the proceeds of the sale of our interest in Morila.

COVID-19 remains a risk to the business as new variants emerge and spread across the world, but we have a significantly more robust balance sheet than a year ago, increased inventories on our sites, and a much improved understanding of the practicalities of operating safely and maintaining business continuity during periods of increased transmission of the virus. We remain alert to unanticipated risks emerging as the virus evolves, seeking to retain the flexibility and cohesion that stood us in good stead during 2020. We will work closely with our government stakeholders to support their vaccination efforts as vaccines become available, prioritising our employees and contractors, their dependants, and the populations in our host communities.

Our top 10 residual group risks

Our risks are assessed over the short, medium and long term. The heat map below shows the residual rating for each of our top 10 material risks over a three-year view (medium term). Residual risk is the Company’s exposure to a particular risk once mitigation measures have been applied to the inherent risk.

1. Adverse regulatory changes to mining rights and fiscal requirements

Description

Our experience is that political, tax and economic laws and policies in countries in which we operate can change rapidly. We operate in countries that can from time to time experience a degree of social and political instability as well as economic uncertainty.

See Navigating regulatory and political risks in the <SR>.

Potential contributing factors

Political instability and elections in 2020 in certain operational jurisdictions could elevate political risk impacting the company
Resource nationalism
Regulatory uncertainty

Impact of COVID-19

Government imposed lockdowns
More challenging socio-economic conditions
Increased resource nationalism

Potential consequences

Increased tax and royalty obligations
Increased operating costs reduce cash flow and can adversely impact business plans
Compromised employee safety and security
Adverse impact on market capitalisation
Increased scrutiny from governments, non-governmental organisations and communities

Response and mitigation

Regular, inclusive engagement and broader collaboration with government, communities and NGOs
Continuous monitoring of legislative/political landscape
Use of joint venture alliances in line with host country’s regulatory requirements
Assuring compliance with the relevant country legislation
Government relations framework

Strategic focus areas impacted

Capitals affected and at risk

Committee responsibility

Social, Ethics and Sustainability Committee
Audit and Risk Committee

Risk outlook

The company anticipates increased uncertainty and will maintain flexibility in maintaining long-term optionality