Our risk governance is reflected in our established oversight structures and the management of assigned risk accountabilities.
AngloGold Ashanti is exposed to volatility and various risks in the external operating environment. We recognise that risks and their effective management are intrinsic to this business and, while this remains the case, we will continue to identify and pursue valuecreating opportunities, including the leveraging of existing assets, shareholdings, skills and experience. Risk management is a central component of strategic, operational and project management, and our risk management framework assists us in assessing and managing the risks associated with our business and operational activities. Our framework, which applies across the Company and to all group-managed entities, consists of a formal risk management policy and a set of risk management standards. We adhere to the King IV Corporate Governance Risk Principles, ISO 31000 and to the Committee of Sponsoring Organisations (COSO) Enterprise Risk Management Framework.
Roles 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 oversight of the risk management system, approving risk policy, determining the appropriate levels of risk appetite and tolerance and setting of annual limits for these.
Management is responsible and accountable for effective risk management and practice. The CFO is accountable for the enactment of policy and reports to the Audit and Risk Committee and the board on this matter.
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. These 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 appetite and risk tolerance
A certain degree of risk is inevitable in the conduct of our business. 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 in how risk management is integrated into business planning and operational management.
The board approves the appropriate levels of Group risk tolerance after consideration of the levels of risk appetite and tolerance determined by the Audit and Risk Committee.
Opportunities
Acquisitions
The acquisition of Corvus, completed on 18 January 2022, provides AngloGold Ashanti with the opportunity for district-wide consolidation in Nevada. The combination of Corvus’ assets, the North Bullfrog, Mother Lode, and other exploration areas, with our own neighbouring targets, including the Silicon and Merlin deposits, provides the opportunity for the Beatty District to become a potential Tier One asset with first gold production expected in the next three years.
The transaction is expected to enable AngloGold Ashanti to establish a medium- to longer-term, low-cost production base in a premier gold mining jurisdiction.
Operational effectiveness and cost reduction
A core priority for the organisation is to reduce costs, such that the business is profitable at lower prevailing gold prices. Key to this objective is to embed the new Operating Model and the organisational model that supports it. The new Operating Model aims to reduce wasteful spending and activity, remove unnecessary duplication of roles at multiple places in the organisation, and empower the revenue generating assets with the resources needed to execute on their business plans. In all, this change to the business is expected to provide improved and more consistent operating outcomes. In parallel with this process, work is also underway to review planned operating and capital expenditures while also conducting a full asset potential review of our operating sites to ensure each is operating at its full potential.
Project development
Development of new projects has the potential to improve the cost and life-of-mine profile of the Company’s portfolio, and improve its long-term optionality. The redevelopment of Obuasi in Ghana is well advanced and the operation is expected to ramp up to a steady state of 4,000tpd of mining by the middle of 2022. The most advanced projects in the pipeline currently are those in southern Nevada’s Beatty district, including our own Silicon deposit and the properties newly acquired in the Corvus acquisition; the Gramalote joint operation with B2Gold in Colombia, currently undergoing optimisation of its feasibility study to improve returns; and the Quebradona copper and gold deposit, also in Colombia, which has appealed a decision by the national environmental regulator to ‘archive’ its environmental permit application, meaning that the regulator will not approve or deny the application.
Climate change
There are substantial opportunities for the gold supply chain – including gold mining – to implement decarbonisation initiatives and move toward a future with net zero GHG emissions, as revealed by the work undertaken by the World Gold Council to understand the gold sector’s GHG emissions profiles and climate change impacts. Climate change risk assessments undertaken in 2020 for all our operating assets and the Quebradona project showed that most physical change-related climate risks have already been identified and included in operational-level risk registers.
We recognise that the effects of climate change may alter the frequency and severity of weather and climate hazards. Using the latest climate data and projections for a range of climate hazards, operational teams were guided through a participatory approach to consider how risks may be affected into the 2030s, focusing on the worst-case scenario (equivalent to a 4.3°C increase in the global average temperature by the end of the century, relative to pre-industrial temperatures), which would require the most robust adaptation measures.
When planning our response to individual physical climate risks, we consider risk management actions that apply to many areas of the business – including those related to information, governance and policy – as well as any operational changes and physical modifications.
We recognise that in some cases our understanding of the risks and required adaptive(1) measures need to be developed further. Informational actions were thus key in enabling us to successfully build on our 2020 climate change risk assessments. These include expanding our monitoring and early warning systems, together with more detailed quantitative modelling and risk assessments. To strengthen climate governance controls, awareness-raising and capacity-building activities are essential in ensuring that our employees have the knowledge and skills necessary for good decision-making and to ensure that our functional policies and standards are fit for purpose.
Operational actions include many simple, cost efficient and flexible options – such as increased frequency of routine maintenance activities – to ensure our assets, infrastructure and equipment are performing optimally. Physical modifications covering both ‘hard’ engineering solutions and ‘softer’ nature-based solutions, tend to be more complex and costly. Nature-based solutions are potentially attractive as they frequently offer multiple benefits beyond management of the initial risk such as environmental improvements and contributions to social value.
- Adaptation: The process of adjustment to actual or expected climate and its effects. In human systems, adaptation seeks to moderate or avoid harm or exploit beneficial opportunities. In some natural systems, human intervention may facilitate adjustment to expected climate and its effects. Mitigation (of climate change): A human intervention to reduce the sources or enhance the sinks of greenhouse gases (GHGs). IPCC. (2014). Climate Change 2014: Synthesis Report.
Emerging risks
Supply chain disruptions and constraints
The global impact of the COVID-19 pandemic on logistics and global supply chains across geographies and industries, including the mining and metals sectors has been unprecedented and continues to present challenges for our operations, despite the resilience our operations have demonstrated over the past two years. Supply disruptions, higher costs, extended lead times and greater inflationary pressures will require continued management in order to minimise the impact on operations.
We continue to see challenges in securing the key underground expatriate skills required in Africa, especially those from Western Australia.
The unintended consequences of the COVID-19 pandemic have shifted commodity and labour markets, resulting in market imbalances with shortages in certain sectors and a surplus in others.
For detail on our strategy and its strategic objectives, see Performance and delivery by strategic focus area.
For more on anticipated inflationary impacts, see Global macro-economics and geopolitics.
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 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.
Rank (previous) | Risk owners * | Potential risk |
---|---|---|
1 (1) | CLO, COO, CFO | Adverse regulatory changes to mining rights and fiscal requirements |
2 (2) | COO | Inability to convert Mineral Resource and Ore Reserve |
3 (4) | CTO | Failure to successfully deliver and ramp up growth projects |
4 (3) | COO, CFO | Adverse future implications for the industry and event risks |
5 (5) | COO, CTO | Failure to meet our operational and safety targets |
6 (8) | CFO, COO, CTO | Failure to move down the industry cost curve – all-in sustaining costs competitiveness |
7 (7) | CSCAO | Loss of or threats to social licence to operate |
8 (6) | CPO | Failure to attract and retain critical skills and talent |
9 (9) | CFO | Adverse gold and commodity prices, and currency movements |
10 (10) | CSCAO | Inability to meet expectations on responsible mining (ESG performance) |
* See Executive Committee
Strategy
Mining is a long-term business, and so our strategy aims to create sustained value over the life of our mining operations and beyond. This involves careful allocation of key resource inputs – the natural, human, intellectual, financial, manufactured, and social and relationship capitals – which are essential to achieving this aim.
For detail on our strategy and strategic focus areas, see Our strategy – an overview.
Our principal risks
Our risks are assessed over the short, medium and long term. Not all of these factors contributing to our principal risks are within the control of management as they are influenced by external factors outside of management’s control. These external factors include among other things COVID-19 and its lingering impacts on employees, supply chain resilience, resource nationalism, macroeconomic factors, the gold price, and unforeseen events in our areas of operation. These factors carry varying degrees of uncertainty and at times require agile responses to manage the risks. For more on these external factors, see Our external operating environment in this report.
1
Adverse regulatory changes to mining
rights and fiscal requirements
Risk description
Experience shows that political, tax and economic laws and policies in our operating jurisdictions 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.
Mitigating action
- Conduct regular, inclusive engagement and broader collaboration with governments, communities and NGOs
- Continuously monitor legislative, regulatory and political landscape
- Make use of joint venture alliances with local companies in line with host country’s regulatory requirements to improve participation of host-country industries
- Ensure compliance with relevant country legislation and regulation
- Have in place a government relations framework to guide engagement
Strategic focus areas impacted
Oversight
- Social, Ethics and Sustainability Committee
- Audit and Risk Committee
2
Inability to convert
Mineral Resource and
Ore Reserve
Risk description
It is essential to replace depleted Ore Reserve in order to maintain or increase production in the long term. If not, our operational performance, financial condition and prospects will be adversely affected.
Mitigating action
Short term
- Improve Ore Reserve development to create flexibility for mines to cope with unexpected events that might interrupt and hinder delivery on the mine plan
- Conduct greenfield and brownfield exploration to replenish mineral inventory
- Increase conversion of the Mineral Resource to Ore Reserve
- Apply robust business planning, portfolio optimisation and feasibility studies to support Ore Reserve conversion
Long term
- Implement focused greenfield exploration targeting new discoveries
- Continue focus on brownfield exploration
- Rank opportunities based on returns and affordability
Strategic focus areas impacted
Oversight
- Investment Committee
3
Failure to successfully deliver and ramp up growth projects
Risk description
Failure to develop and operate projects in line with expectations could negatively impact business performance.
Mitigating action
- Adopt robust approach to regular stage-gate project reviews to assess projects and allocate capital in accordance with our capital allocation framework
- Ensure appropriate project skills, systems, structures and governance are in place
- Create multi-disciplinary steering committee
- Ramp up safe operations at Obuasi and learning from the case study
Feasibility study
- Finalise Quebradona feasibility study and address any gaps in the Environmental Impact Assessment required by regulators to secure outstanding permits
- Await completed feasibility study of Gramalote from project operator B2Gold
Strategic focus areas impacted
Oversight
- Investment Committee
4
Adverse future implications for the industry and event risks
Risk description
Potentially catastrophic events include among other events the COVID-19 pandemic, a TSF failure and our inability to ensure liquidity of the business. Such events could have significant financial consequences and cause fundamental changes in the way we operate.
Mitigating action
- Continue ongoing monitoring of the evolving pandemic and agile COVID-19 response planning
- Ensure adequate liquidity and bond submission in anticipation of prolonged impact of COVID-19
- Undertake comprehensive TSF governance and management framework, standards and guidelines developed to address tailings-related risks
- Convert TSFs to dry stacking in Brazil
Strategic focus areas impacted
Oversight
- Social, Ethics and Sustainability Committee
- Audit and Risk Committee
5
Failure to meet our operational and safety targets
Risk description
Unplanned stoppages and unforeseen operational interruptions, and operational accidents or injuries that can impact production could adversely impact business performance.
Mitigating action
- Ensure delivery of business plans by focusing on Mineral Resource modelling, integrated business planning and execution
- Improve Ore Reserve life and planning certainty
- Maintain operational excellence programmes aimed at improving on budget, productivity and efficiencies
- Focus on safe production across all operations to achieve zero harm including the implementation of refreshed safety strategy
- Continue ongoing monitoring of the evolving pandemic and agile COVID-19 response planning
- Roll-out of vaccination programmes and ongoing education, awareness and policy changes to mitigate vaccine disinformation and hesitancy
Strategic focus areas impacted
Oversight
- Investment Committee
- Audit and Risk Committee
- Social, Ethics and Sustainability Committee
6
Failure to move down the industry cost curve – all-in sustaining cost competitiveness
Risk description
Margins and free cash flow are at risk when the gold price remains static or declines, when production targets are not met or when all-in sustaining costs increase, potentially having an adverse impact on our financial position.
Mitigating action
- Drive operational excellence programmes
- Introduce lower cost ounces to the Ore Reserve
- Optimise capital to generate maximum returns
- Complete asset sales enable enhanced focus on higher-return assets
- Implement new Operating Model to improve effectiveness, ensure better operational outcomes and reduce costs
- Undertake full asset potential reviews
Strategic focus areas impacted
Oversight
- Audit and Risk Committee
- Investment Committee
7
Loss of or threats to social licence to operate
Risk description
Failure to operate in a sustainable and responsible manner to provide benefits to communities could threaten our social licence to operate and adversely impact our financial position.
Mitigating action
- Target stakeholder mapping and engagement
- Monitor legislative, regulatory and political landscape in anticipation of negative impact on business
- Meet local content and localisation requirements
- Share economic benefits and value created with host countries and communities
- Review sustainability performance with general managers and increase overall awareness among senior management cohort across all operations
- Assess status of social licence to operate at operations
- Collaborate with health authorities on national vaccination programme implementation
Strategic focus areas impacted
Oversight
- Social, Ethics and Sustainability Committee
8
Failure to meet our operational and safety targets
Risk description
Inability to retain and attract sufficiently skilled and experienced employees may harm our business and growth prospects. Having the right people with the required skills is vital to the efficient conduct of our business and strategic delivery.
Mitigating action
- Implement key human resource initiatives to ensure productive and engaged workforce
- Implement transformation model to identify future critical skills requirements
- Integrate talent management and succession planning, with an increased coverage ratio for critical skills
- Increase training capacity for scarce artisan skills
- Implement short- and long-term incentive schemes
- Conduct employee engagement surveys
- Enable remote working functionality
- Develop and implement response plans
Strategic focus areas impacted
Oversight
- Social, Ethics and Sustainability Committee
- Remuneration Committee
9
Failure to move down the industry cost curve – all-in sustaining cost competitiveness
Risk description
Lower spot prices and strengthening of currencies in host countries will adversely impact our ability to generate free cash flow.
Mitigating action
- Enhance cost competitiveness by improving quality of the portfolio
- Focus on cost, efficiencies, and capital discipline
- Maintain long-term optionality by ensuring competitive project pipeline
- Improve debt profile and interest cost of capital
- Apply conservative gold price and currency planning assumptions
- Conduct sensitivity analyses on gold price, production, exchange rates and Group risk adjustments
- Implement new Operating Model to improve effectiveness, ensure better operational outcomes and reduce costs
Strategic focus areas impacted
Oversight
- Audit and Risk Committee
- Investment Committee
10
Inability to meet investor expectations on responsible mining (ESG performance)
Risk description
Irresponsible mining practices and/or perceptions that we are insufficiently committed to ESG matters could lead to investors divesting AngloGold Ashanti’s securities, increased reputational risk, and an adverse impact on the price of our securities and our social licence to operate.
Mitigating action
- Conduct regular engagement and collaboration with stakeholders
- Undertake transparent reporting and public disclosure
- Review sustainability performance with general managers and increase overall awareness among senior management cohort across all operations
- Ensure good corporate citizenship and governance
- Manage and limit environmental impacts and progress achievement of targets
- Integrate climate considerations into the business and undertake physical climate risk assessments for all operations
- Implement Climate Change Strategy
- Include stakeholders in COVID-19 response plans
- Implement a human rights framework
- Enhance diversity and inclusion practices
Strategic focus areas impacted
Oversight
- Investment Committee
- Social, Ethics and Sustainability Committee