External operating environment

The environment in which AngloGold Ashanti operates is dynamic and often complex, with external factors beyond our control influencing delivery on our strategy and our ability to create value.

The COVID-19 pandemic, in its second full year, had direct and indirect impacts which created new and ongoing challenges in our operating environments and wider society. These included the more obvious direct impacts of increased absenteeism due to illness and quarantine requirements as new variants of the virus brought new infection peaks, but also increased shortages of critical skills in jurisdictions where travel and border restrictions shrunk the labour pool. These phenomena also disrupted global supply chains, exacerbating inflationary pressures, including for key goods and services used in our production processes. Societal implications of the pandemic remain significant, including heightened geopolitical tensions, ongoing uncertainty, increasing inequality and rising poverty, and strains on physical and mental well-being of employees, their families and communities.

Against this backdrop, investors increased the call for companies in which they invest to improve their own sustainability practices, governance and their contribution to society while reducing their impact on the environment.

Externally, AngloGold Ashanti was primarily affected by:

  • COVID-19 pandemic
  • Global geopolitics and macro-economics, including inflationary pressures amid labour shortages, supply chain disruptions and energy shortages
  • Growing climate crisis and increasing pressure to decarbonise operations
  • Uncertain and increasingly rigorous regulatory requirements
  • Increasing stakeholder and societal expectations in respect of ESG performance and disclosures
  • Pressure from international credit ratings

COVID-19 pandemic

Explanation and impact

The pandemic has had far-reaching social and economic impacts during its second year.

As governments rolled out measures to limit the spread of the virus, the normal running of operations was affected by illness, quarantine requirements, lockdowns and ever-changing travel restrictions, all of which continue to hamper economic growth in key sectors and erode societal norms.

Our response

  • Actively worked to mitigate the impact of significant disruptions, operational or otherwise, due to COVID-19
  • Supported host governments, NGOs and communities
  • Established a cross-functional team to manage crisis response
  • Implemented strict operating protocols at all operations
  • Implemented site contingency plans under regular testing and review
  • Halted non-essential travel and tighten approvals for essential travel
  • Increased awareness, surveillance and screening
  • Implemented strict quarantine and isolation protocols

Outlook

Although several vaccines have been approved in certain jurisdictions, vaccine demand will likely far outstrip supply for some time. Vaccine programmes are largely directed by governments and influenced by the regional availability of doses. We are actively monitoring the situation and have in place vaccine protocols and guidance aligned with host government policies.

We are committed to ethical and responsible sourcing of vaccines in a manner that does not disadvantage vulnerable and high-risk groups. We are working to ensure that our high-risk employees and their families are included in national priority lists and vaccination programmes. We are raising awareness of the safety and efficacy of vaccines among our workforce, and are using workplace policies to combat vaccine disinformation and hesitancy.


Related strategic focus areas

  • Focus on people, safety and sustainability
  • Optimise overhead, costs and capital expenditure

Global macro-economics and geopolitics, including inflationary pressures amid labour shortages, supply chain disruptions and energy shortages

Explanation and impact

Economic uncertainty and heightened geopolitical tensions impact several factors that can influence commodity prices, exchange rates, and interest rates. These factors, together with investor sentiment, influence the gold price, which in turn affects the financial results of our business.

The COVID-19 pandemic led to economic shutdowns around the world. The International Monetary Fund estimates that the global economy rebounded in 2021, with growth of 5.9% compared to a contraction of 3.5% in 2020.

Inflation, which reached 7% in the US at the end of 2021 – its highest level in almost two decades – remained a key risk amid increased economic stimulus since the onset of the pandemic, rising energy prices, and shortages of labour in key parts of the world’s supply chain, among other things.

The gold price received averaged $1,796/oz in 2021, which, although high relative to the average price over the past decade, was little changed from the $1,778/oz the prior year. Continued price increases amid rising inflationary expectations were countered by expectations of rising interest rates as monetary authorities in the world’s largest economies signalled their willingness to raise interest rates to check rising prices.

The unprovoked invasion of Ukraine by Russian forces in late February 2022 has caused enormous suffering and loss of life as well as significant disruption to financial and commodity markets. As of the time of completing this report, in late March 2022, prices for several hard and soft commodities had reached their highest levels in a decade or more, or in some cases had set records. Brent crude oil touched levels not seen since 2012, copper advanced to its highest level ever. Corn and wheat both soared to multi-year highs. Gold responded as it should in times of inflation and geopolitical stress, exceeding $2,000/oz in early March. While it is unclear whether these sudden price spikes will endure, the higher cost for basic commodities used in our host countries and communities, and as key production inputs, could impact our costs.

Our response

  • Rigorously managed those variables in our control
  • Started implementation of a new operating model during the fourth quarter of 2021 to reduce overhead costs, improve effectiveness by simplifying organisational structure and locating resources closer to each operation to ensure their delivery onbudget
  • Renewed emphasis on our ‘Operational Excellence’ initiatives to optimise operating processes and reduce costs, while ensuring our workforce is fully engaged and appropriately skilled
  • Continued investment in capital projects that will increase grade, lengthen mine lives and widen margins over the medium-to-long term
  • Strengthened the balance sheet by reducing debt, increasing the tenor of borrowings and lowering the average interest rate
  • Disciplined capital allocation for exploration projects to extend mine life and improve the quality of our portfolio

Outlook

A robust economic recovery in the US, Europe and China, coupled with severe complications in the global supply chain, has brought with it accelerating inflation and the prospect of rising interest rates. The pace at which the US Federal Reserve is prepared to raise interest rates to combat inflation will have a direct impact on gold prices in the year ahead. The focus of the business will be to lower costs and ensure profitability at lower gold prices.


Related strategic focus areas

  • Improve portfolio quality
  • Enhance financial flexibility
  • Optimise overhead, costs and capital expenditure

Growing climate crisis and increasing pressure to decarbonise operations

Explanation and impact

Changing rainfall patterns, rising sea levels, higher temperatures, reduced supply of industrial and potable water and severe weather conditions caused by global climate change remain growing concerns for businesses, investors, broader society and governments. This has led to growing pressure to reduce greenhouse gas (GHG) emissions and to limit energy and water usage and to promote responsible practices in line with the Conference of the Parties (COP) on Climate Change, the Paris Agreement, the SDGs and other standards.

Our response

  • Maintained focus on improving ESG performance and developing a Climate Change Strategy for the business
  • Concluded physical risk assessments covering different climate scenarios and issued our inaugural Climate Change Report in line with the guidelines and recommendations of the TCFD
  • After meeting our initial climate targets in 2018, started detailed work on new 2030 GHG emissions targets
  • Recommitted to net zero Scope 1 and 2 GHG emissions by 2050 and, in partnership with our value chain partners, to set Scope 3 GHG reduction targets, if not by the end of 2023, as soon as possible thereafter
  • Climate Change Working Group continued its focus on the related strategy and transition processes, and will oversee implementation of the new Climate Change Strategy adopted in 2021
  • Maintained compliance with our corporate frameworks, standards and guidelines, as well as external ones including the ICMM and the World Gold Council’s Responsible Gold Mining Principles, among others

Outlook

Pressure from governments, investors and broader society is likely to intensify to improve environmental stewardship and reduce GHG emissions, both in absolute terms and in terms of consumption rates per tonne mined. This trend is being driven by national commitments under the Paris Agreement to limit average global temperature increases to less than 1.5 degrees Celsius by 2050. To achieve this, global emissions are projected to need reductions of 8-10% annually between 2020 and 2050. Work is ongoing to set new medium-term targets, and then to progress work toward charting a pathway to net zero Scope 1 and 2 GHG emissions by 2050. Our power mix already includes hydro-electric energy in the DRC and Brazil, while our planned Colombia projects will be largely hydro-powered. Our Australian operations, previously powered by diesel generators, presently use natural gas.


Related strategic focus areas

  • Focus on people, safety and sustainability
  • Improve portfolio quality
  • Maintain long-term optionality

Uncertain and increasingly rigorous regulatory requirements

Explanation and impact

Regulatory certainty facilitates decision-making in relation to long-term investments in mining assets with lives spanning several decades. Regulatory changes relating to mining rights, the payment of taxes and royalties, and operating, closure and decommissioning requirements can impact investment returns.

More onerous regulations can result in an increased cost of compliance, which may be compounded by uncertainty in the understanding or application of legislation. This can affect the financial position of the business and its sustainability as well as relationships with government and regulators.

Our response

  • Engaged constructively with governments, local stakeholder groups and regulators to optimise the shared value and benefits derived from the orebody among stakeholders
  • Carefully monitored regulatory changes to ensure compliance and to facilitate long-term planning

Outlook

While we engage regularly with all governments and regulators, particular attention is given to negotiations with regulators in Colombia (on mining and environmental permitting), Tanzania (on taxation), Brazil (on evolving legislation on TSFs) and countries in Africa (Guinea, Tanzania and Ghana) that are considering legalising or formalising small-scale and artisanal mining. With respect to TSFs, we remain committed to implementing the Global Industry Standard on Tailings Management, and the conversion of our TSFs in Brazil to drystacking is well advanced. We engage with host governments and monitor and evaluate actual or anticipated regulatory changes, for timely implementation and compliance.


Related strategic focus areas

  • Focus on people, safety and sustainability
  • Enhance financial flexibility
  • Maintain long-term optionality

Increasing stakeholder and societal expectations in respect of ESG performance and disclosures

Explanation and impact

Companies, particularly those in the extractive industries, face
increased scrutiny worldwide from an array of stakeholders:

  • Providers of capital and ratings agencies have increasing expectations relating to financial, operating and ESG performance
  • Governments’ expectations relate to contributions to the fiscus and to national and local economies, as well as partnerships to facilitate service delivery and social and economic development
  • Communities’ expectations relate to socio-economic benefits – local employment and procurement opportunities, and the provision of infrastructure, healthcare and education

Our response

  • Engaged constructively with stakeholders to better understand their requirements, to consistently manage their expectations, and to secure and maintain our social licence to operate
  • Delivered on related strategic objectives and commitments
  • Ensured responsible corporate citizenship, in line with our values
  • Maintained and improved our ESG performance – set targets and transparently reported progress made in meeting these targets
  • Created shared value for communities in host countries – through employment and procurement opportunities, and by investing in socio-economic initiatives that promote long-term resilience and self-sufficiency

Outlook

There has been increasing expectation from governments, investors and broader society for greater disclosure on ESG matters as well as performance and sustainability metrics in general. On disclosure, we have comprehensive ESG data sets available on our website, and we will continue to participate annually in a number of ESG rating agency surveys and aim to respond promptly to related queries. We have continued to provide support to our host communities with respect to their responses to the COVID-19 pandemic. For more detail, see our <SR>.


Related strategic focus areas

  • Focus on people, safety and sustainability
  • Enhance financial flexibility
  • Maintain long-term optionality

Pressure from international credit ratings

Explanation and impact

As the ratings agencies assess the credit risk of a company and its ability to honour its debt obligations, the assessments sometimes take into account the jurisdiction within which the company is located or operates since the country’s political, economic and regulatory environment can have an impact on the company.

Our response

  • Engaged regularly with ratings agencies to ensure an accurate understanding of our potential operating and financial performance
  • Continued to look at operational efficiencies that will make our mines more consistent in production, more resilient to gold price volatility and thus provide stable and sustainable cash flows
  • Current company ratings are as follows:
    • S&P: BB+/positive
    • Moody’s: Baa3/negative
    • Fitch: BBB-/stable

Outlook

South Africa’s sovereign rating by Fitch, Moody’s and S&P will continue to determine whether and by how much our credit rating can improve, as our corporate rating cannot be more than two notches above the sovereign rating of our country of domicile (South Africa). We also remain exposed to other lower-rated sovereign countries. Our overall credit rating has improved since 2019, a result of a more stable operating performance, improved cash generation, and consistent delivery on our strategic objectives, with the agencies taking greater account of the consistent delivery on our strategic objectives.


Related strategic focus areas

  • Improve portfolio quality
  • Enhance financial flexibility

Principal uses of gold

Investment
  • Gold is a long-term store of value independent of other assets. As its price often moves contra-cyclically, it can protect or enhance the performance of an investment portfolio and reduce volatility. Demand for gold rose 10% in 2021, with increases in most areas including central bank buying and jewellery sales, as broader economic uncertainty and inflationary fears remained and consumer markets rebounded from poor sales during the first year of the pandemic in 2020
  • Central banks are also a strong source of demand, with volumes having increased steadily over the past decade
Technology, aerospace, environment
  • Gold wire is widely used in almost all electronic devices that make the Internet function – computers, mobile phones, global positioning systems, etc. As an efficient and reliable conductor and connector, it enables the rapid, accurate transmission of data
  • In space, layers of gold are used to protect astronauts and equipment from heat and radiation
  • Gold nanoparticles are used to improve the efficiency of solar cells and panels
  • Environmentally, nanoparticles are used to clean contaminated groundwater by breaking down pollutants
Jewellery
  • Historically, gold jewellery has been the strongest source of demand, accounting for around 50% of total demand. In 2021, jewellery demand rose 52%, recovering from losses sustained during 2020. The largest gold jewellery markets are India and China
Medicine and dentistry
  • Gold nanoparticles are used in rapid diagnostic testing, which have helped to revolutionise the diagnosis of diseases such as HIV/Aids
  • Gold-based drugs are being developed to treat diseases such as rheumatoid arthritis
  • Gold nanoparticles deliver anti-cancer drugs directly to tumours
  • Gold’s being malleable and non-allergenic makes it ideal for use in dentistry