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AU AngloGold Ashanti

Filed: 30 Mar 17, 8:00pm
Table of Contents

As filed with the Securities and Exchange Commission on 31 March 2017

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FINANCIAL YEAR ENDED 31 December 2016

Commission file number:1-14846

AngloGold Ashanti Limited

(Exact Name of Registrant as Specified in its Charter)

Republic of South Africa

(Jurisdiction of Incorporation or Organisation)

76 Rahima Moosa Street, Newtown, Johannesburg, 2001

(P.O. Box 62117, Marshalltown, 2107)

South Africa

(Address of Principal Executive Offices)

 

Kandimathie Christine Ramon, Chief Financial Officer, Telephone: +27 11 6376019

E-mail: cramon@anglogoldashanti.com, 76 Rahima Moosa Street, Newtown, Johannesburg, 2001, South Africa

(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class  Name of each exchange on which registered

American Depositary Shares

  New York Stock Exchange

Ordinary Shares

  New York Stock Exchange*

5.375% Notes due 2020

  New York Stock Exchange

5.125% Notes due 2022

  New York Stock Exchange

6.50% Notes due 2040

  New York Stock Exchange
*

Not for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission

Securities registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares of 25 ZAR cents each

   408,223,760 

A Redeemable Preference Shares of 50 ZAR cents each

   2,000,000 

B Redeemable Preference Shares of 1 ZAR cent each

   778,896 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

  Yes  No       

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

  Yes  No       

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

  Yes  No       

Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)*.

  Yes  No       

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule12b-2 of the Exchange Act.

 

 

(Check one): Large Accelerated Filer 

  Accelerated Filer  

Non-Accelerated Filer     

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

  U.S. GAAP 

International Financial Reporting Standards as issued by the International Accounting Standards Board Other

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

  Yes  No         

 

*

This requirement does not apply to the registrant.


Table of Contents
TABLE OF CONTENTS    
   Page 

Presentation of information

   3 

Certain forward-looking statements

   4 

Glossary of selected terms

   5 
 

Mining terms

   5 
 

Financial terms

   8 
 

Currencies

   9 
 

Abbreviations

   10 

Part I:

 

Item 1:

 

Identity of directors, senior management and advisors

   11 

Item 2:

 

Offer statistics and expected timetable

   11 

Item 3:

 

Key information

  
 3A.    

Selected financial data

   11 
 3B.    

Capitalisation and indebtedness

   15 
 3C.    

Reasons for the offer and the use of proceeds

   15 
 3D.    

Risk factors

   15 

Item 4:

 Information on the company   48 
 4A.    

History and development of the company

   48 
 4B.    

Business overview

   49 
 4C.    

Organisational structure

   104 
 4D.    

Property, plant and equipment

   105 

Item 4A:

 

Unresolved staff comments

   130 

Item 5:

 

Operating and financial review and prospects

   131 
 5A.    

Operating results

   132 
 5B.    

Liquidity and capital resources

   175 
 5C.    

Research and development, patents and licenses, etc.

   180 
 5D.    

Trend information

   181 
 5E.    

Off-balance sheet arrangements

   181 
 5F.    

Tabular disclosure of contractual obligations

   181 

Item 6:

 

Directors, senior management and employees

   182 
 6A.    

Directors and senior management

   182 
 6B.    

Compensation

   189 
 6C.    

Board practices

   192 
 6D.    

Employees

   196 
 6E.    

Share ownership

   197 

Item 7:

 

Major shareholders and related party transactions

   203 
 7A.    

Major shareholders

   204 
 7B.    

Related party transactions

   205 
 7C.    

Interests of experts and counsel

   205 

Item 8:

 

Financial information

   206 
 8A.    

Consolidated financial statements and other financial information

   206 
   

Legal proceedings

   206 
   

Dividends

   211 
 8B.    

Significant changes

   211 

 

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Table of Contents

Item 9:

    

The offer and listing

  

212

    9A.      

Offer and listing details

  212
    9B.      

Plan of distribution

  212
    9C.      

Markets

  213
    9D.      

Selling shareholders

  213
    9E.      

Dilution

  213
    9F.      

Expenses of the issue

  213

Item 10:

    

Additional information

  

214

    10A.    

Share capital

  214
    10B.    

Memorandum of Incorporation

  216
    10C.    

Material contracts

  221
    10D.    

Exchange controls

  231
    10E.    

Taxation

  232
    10F.    

Dividends and paying agents

  237
    10G.    

Statement by experts

  237
    10H.    

Documents on display

  237
    10I.     

Subsidiary information

  237

Item 11:

    

Quantitative and qualitative disclosures about market risk.

  238

Item 12:

    

Description of securities other than equity securities

  

243

    12A.    

Debt securities

  243
    12B.    

Warrants and rights

  243
    12C.    

Other securities

  243
    12D.    

American Depositary Shares

  

243

        

12D.3      Depositary fees and charges

  243
        

12D.4      Depositary payments for 2016

  243

Part II:

  

244

Item 13:

    

Defaults, dividend arrearages and delinquencies

  244

Item 14:

    

Material modifications to the rights of security holders and use of proceeds

  245

Item 15:

    

Controls and procedures

  246

Item 16A:

    

Audit committee financial expert

  249

Item 16B:

    

Code of Ethics and Whistleblowing Policies

  250

Item 16C:

    

Principal accountant fees and services

  251

Item 16D:

    

Exemptions from the listing standards for audit committees

  251

Item 16E:

    

Purchases of equity securities by the issuer and affiliated purchasers

  251

Item 16F:

    

Change in registrant’s certifying accountant

  252

Item 16G:

    

Corporate Governance

  252

Item 16H:

    

Mine Safety Disclosure

  252

Part III:

  

253

Item 17:

    

Financial statements

  253

Item 18:

    

Financial statements

  254 and F pages

Item 19

    

Exhibits

  E pages

 

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PRESENTATION OF INFORMATION

AngloGold Ashanti Limited

In this annual report on Form20-F, unless the context otherwise requires, references to AngloGold, AngloGold Ashanti, AGA, the company, the Company and the group are references to AngloGold Ashanti Limited including, as appropriate, subsidiaries and associate companies of AngloGold Ashanti Limited.

IFRS financial statements

As a company incorporated in the Republic of South Africa, AngloGold Ashanti prepares annual audited consolidated financial statements and unaudited consolidated half-year financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) in the English language. These financial statements are distributed to shareholders and are submitted to the JSE Limited (JSE), as well as the New York, Australian and Ghana stock exchanges.

Currency

AngloGold Ashanti presents its consolidated financial statements in United States dollars.

In this annual report, references to rands, ZAR and R are to the lawful currency of the Republic of South Africa, references to US dollars, dollar or $ are to the lawful currency of the United States, references to and Euro are to the lawful currency of the European Union, references to ARS and Argentinean peso are to the lawful currency of Argentina, references to AUD and A$ are to the lawful currency of Australia, references to BRL are to the lawful currency of Brazil, references to Tsh are to the lawful currency of the United Republic of Tanzania and references to GHC, cedi or Gh¢ are to the lawful currency of Ghana.

See “Item 3A: Selected financial data – Exchange rate information” for historical information regarding the US dollar/South African rand exchange rate. On 22 March 2017, the interbank US dollar/South African rand exchange rate as reported by Reuters was R12.57/$1.00.

Non-GAAP financial measures

In this annual report on Form20-F, AngloGold Ashanti presents the financial items “total cash costs”, “total cash costs per ounce”, ,“all-in sustaining costs”,“all-in sustaining costs per ounce”,“all-in costs” and“all-in costs per ounce”, which are not IFRS measures. An investor should not consider these items in isolation or as alternatives to cost of sales, profit/(loss) applicable to equity shareholders, profit/(loss) before taxation, cash flows from operating activities or any other measure of financial performance presented in accordance with IFRS.

While the Gold Institute provided definitions for the calculation of total cash costs and during June 2013 the World Gold Council published a Guidance Note on“all-in sustaining costs” and“all-in costs” metrics, the calculation of total cash costs, total cash costs per ounce,all-in sustaining costs,all-in sustaining costs per ounce,all-in costs andall-in costs per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis for comparison with other gold mining companies. See “—Glossary of selected terms–Financial terms–Total cash costs”, “ —Glossary of selected terms–Financialterms–All-in sustaining costs” and “—Glossary of selected terms–Financialterms–All-in costs”. Nevertheless, AngloGold Ashanti believes that total cash costs,all-in sustaining costs andall-in costs in total and per ounce are useful indicators to investors and management as they provide:

 

an indication of profitability, efficiency and cash flows;

 

the trend in costs as the mining operations mature over time on a consistent basis; and

 

an internal benchmark of performance to allow for comparison against other mines, both within the AngloGold Ashanti group and at other gold mining companies.

A reconciliation of both cost of sales and total cash costs as included in the company’s audited financial statements to total cash costs,all-in sustaining costs andall-in costs for each of the three years ended 31 December 2014, 2015 and 2016 is presented herein. See “Item 5: Operating and Financial Review and Prospects—Totalall-in sustaining costs,all-in costs and total cash costs”.

Shares and shareholders

In this annual report on Form20-F, references to ordinary shares, ordinary shareholders, equity shareholders and shareholders/members, should be read as common stock, common stockholders and stockholders, respectively, and vice versa.

 

3


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CERTAIN FORWARD-LOOKING STATEMENTS

Certain statements contained in this document, other than statements of historical fact, including, without limitation, those concerning the economic outlook for the gold mining industry, expectations regarding gold prices, production, total cash costs,all-in sustaining costs,all-in costs, cost savings and other operating results, productivity improvements, growth prospects and outlook of AngloGold Ashanti’s operations, individually or in the aggregate, including the achievement of project milestones, commencement and completion of commercial operations of certain of AngloGold Ashanti’s exploration and production projects and the completion of acquisitions, dispositions or joint venture transactions, AngloGold Ashanti’s liquidity and capital resources and capital expenditures and the outcome and consequence of any potential or pending litigation or regulatory proceedings or environmental, health and safety issues, are forward-looking statements regarding AngloGold Ashanti’s operations, economic performance and financial condition.

These forward-looking statements or forecasts involve known and unknown risks, uncertainties and other factors that may cause AngloGold Ashanti’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in these forward-looking statements. Although AngloGold Ashanti believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of among other factors, changes in economic, social and political and market conditions, the success of business and operating initiatives, changes in the regulatory environment and other government actions, including environmental approvals, fluctuations in gold prices and exchange rates, the outcome of pending or future litigation proceedings and business and operational risk management and other factors as described in “Item 3D: Risk factors” and elsewhere in this annual report. These factors are not necessarily all of the important factors that could cause AngloGold Ashanti’s actual results to differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. Consequently, readers are cautioned not to place undue reliance on forward-looking statements.

AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events, except to the extent required by applicable law. All subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are qualified by the cautionary statements herein.

 

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GLOSSARY OF SELECTED TERMS

The following explanations are not intended as technical definitions but should assist the reader in understanding terminology used in this annual report. Unless expressly stated otherwise, all explanations are applicable to both underground and surface mining operations.

Mining terms

 

 

All injury frequency rate:The total number of injuries and fatalities that occurs per million hours worked.

 

BIF:Banded Ironstone Formation. A chemically formed iron-rich sedimentary rock.

 

By-products:Any products that emanate from the core process of producing gold, including silver, uranium and sulphuric acid.

 

Carbon-in-leach (CIL):Gold is leached from a slurry of gold ore with cyanide in agitated tanks and adsorbed on to activated carbon granules at the same time (i.e. when cyanide is introduced in the leach tank, there is already activated carbon in the tank and there is no distinction between leach and adsorption stages). The carbon granules are separated from the slurry and treated in an elution circuit to remove the gold.

 

Carbon-in-pulp (CIP): Gold is leached conventionally from a slurry of gold ore with cyanide in agitated tanks. The leached slurry then passes into the CIP circuit where activated carbon granules are mixed with the slurry and gold is adsorbed on to the activated carbon. The gold-loaded carbon is separated from the slurry and treated in an elution circuit to remove the gold.

 

CLR:Carbon leader reef.

 

Comminution:Comminution is the crushing and grinding of ore to make gold available for treatment. (See also “Milling”).

 

Contained gold:The total gold content (tons multiplied by grade) of the material being described.

 

Depletion:The decrease in the quantity of ore in a deposit or property resulting from extraction or production.

 

Development:The process of accessing an orebody through shafts and/or tunneling in underground mining operations.

 

Diorite:An igneous rock formed by the solidification of molten material (magma).

 

Doré:Impure alloy of gold and silver produced at a mine to be refined to a higher purity.

 

Electro-winning:A process of recovering gold from solution by means of electrolytic chemical reaction into a form that can be smelted easily into gold bars.

 

Elution:Recovery of the gold from the activated carbon into solution before zinc precipitation or electro-winning.

 

Feasibility study:A comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of aPre-Feasibility Study (JORC 2012).

 

Flotation:Concentration of gold and gold-hosting minerals into a small mass by various techniques (e.g. collectors, frothers, agitation,air-flow) that collectively enhance the buoyancy of the target minerals, relative to unwanted gangue, for recovery into an over-flowing froth phase.

 

Gold Produced:Refined gold in a saleable form derived from the mining process.

 

Grade:The quantity of gold contained within a unit weight of gold-bearing material generally expressed in ounces per short ton of ore (oz/t), or grams per metric tonne (g/t).

 

Greenschist:A schistose metamorphic rock whose green colour is due to the presence of chlorite, epidote or actinolite.

 

 

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Leaching:Dissolution of gold from crushed or milled material, including reclaimed slime, prior to adsorption on to activated carbon or direct zinc precipitation.

 

Life of mine (LOM):Number of years for which an operation is planning to mine and treat ore, and is taken from the current mine plan.

 

Metallurgical plant:A processing plant constructed to treat ore and extract gold.

 

Milling:A process of reducing broken ore to a size at which concentrating can be undertaken. (See also “Comminution”).

 

Mine call factor:The ratio, expressed as a percentage, of the total quantity of recovered and unrecovered mineral product after processing with the amount estimated in the ore based on sampling. The ratio of contained gold delivered to the metallurgical plant divided by the estimated contained gold of ore mined based on sampling.

 

Mineral deposit:A mineral deposit is a concentration (or occurrence) of material of possible economic interest in or on the earth’s crust.

 

Mineral Resource:A concentration or occurrence of solid material of economic interest in or on the earth’s crust is such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade (or quality), continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources aresub-divided in order of increasing geological confidence, into Inferred, Indicated or Measured categories (JORC 2012).

 

Modifying Factors:Modifying Factors’ are considerations used to convert Mineral Resources to Ore Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

 

Ore Reserve:That part of a mineral deposit which could be economically and legally extracted or produced at the time of the Ore Reserve determination.

 

Ounce (oz) (troy):Used in imperial statistics. A kilogram is equal to 32.1507 ounces. A troy ounce is equal to 31.1035 grams.

 

Pay limit:The grade of a unit of ore at which the revenue from the recovered mineral content of the ore is equal to the sum of total cash costs, closure costs, Ore Reserve development andstay-in-business capital. This grade is expressed as anin-situ value in grams per tonne or ounces per short ton (before dilution and mineral losses).

 

Precipitate:The solid product formed when a change in solution chemical conditions results in conversion of somepre-dissolved ions into solid state.

 

Probable Ore Reserve:Ore Reserve for which quantity and grade are computed from information similar to that used for Proven Reserves, but the sites for inspection, sampling, and measurement are further apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for Proven Reserves, is high enough to assume continuity between points of observation.

 

Productivity:An expression of labour productivity based on the ratio of ounces of gold produced per month to the total number of employees in mining operations.

 

Project capital:Capital expenditure to either bring a new operation into production; to materially increase production capacity; or to materially extend the productive life of an asset.

 

Proven Ore Reserve:A ‘Proven Ore Reserve’ is the economically mineable part of a Measured Mineral Resource. A Proven Ore Reserve implies a high degree of confidence in the Modifying Factors.

 

Recovered grade:The recovered mineral content per unit of ore treated.

 

Reef:A gold-bearing sedimentary horizon, normally a conglomerate band that may contain economic levels of gold.

 

 

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Refining:The final purification process of a metal or mineral.

 

Rehabilitation:The process of reclaiming land disturbed by mining to allow an appropriate post-mining use. Rehabilitation standards are defined by country-specific laws, including but not limited to the South African Department of Mineral Resources, the US Bureau of Land Management, the US Forest Service, and the relevant Australian mining authorities, and address among other issues, ground and surface water, topsoil, final slope gradient, waste handling andre-vegetation issues.

 

Seismic event:A sudden inelastic deformation within a given volume of rock that radiates detectable seismic energy.

 

Shaft:A vertical or subvertical excavation used for accessing an underground mine; for transporting personnel, equipment and supplies; for hoisting ore and waste; for ventilation and utilities; and/or as an auxiliary exit.

 

Short ton:Used in imperial statistics. Equal to 2,000 pounds.

 

Smelting:A pyro-metallurgical operation in which gold precipitate from electro-winning or zinc precipitation is further separated from impurities.

 

Stoping:The process of excavating ore underground.

 

Stripping ratio: The ratio of waste tonnes to ore tonnes mined calculated as total tonnes mined less ore tonnes mined divided by ore tonnes mined.

 

Tailings:Finely ground rock of low residual value from which valuable minerals have been extracted.

 

Tonnage:Quantity of material measured in tonnes or tons.

 

Tonne:Used in metric statistics. Equal to 1,000 kilograms.

 

Waste:Material that contains insufficient mineralisation for consideration for future treatment and, as such, is discarded.

 

Yield:The amount of valuable mineral or metal recovered from each unit mass of ore expressed as ounces per short ton or grams per metric tonne.

 

Zinc precipitation:Zinc precipitation is the chemical reaction using zinc dust that converts gold in solution to a solid form for smelting into unrefined gold bars.

 

 

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Financial terms

 

 

All-in costs:All-in costs areall-in sustaining costs including additionalnon-sustaining costs which reflect the varying costs of producing gold over the life-cycle of a mine.Non-sustaining costs are those costs incurred at new operations and costs related to ‘major projects’ at existing operations where these projects will materially increase production.All-in costs per ounce is arrived at by dividing the dollar value of the sum of these cost metrics, by the ounces of gold sold.

 

All-in sustaining costs:During June 2013 the World Gold Council (WGC), an industry body, published a Guidance Note on“all-in sustaining costs” metric, which gold mining companies can use to supplement their overallnon-GAAP disclosure.“All-in sustaining costs” is an extension of the existing “total cash cost” metric and incorporates all costs related to sustaining production and in particular recognises the sustaining capital expenditure associated with developing and maintaining gold mines. In addition, this metric includes the cost associated with developing and maintaining gold mines. In addition, this metric includes the cost associated with corporate office structures that support these operations, the community and rehabilitation costs attendant with responsible mining and any exploration and evaluation costs associated with sustaining current operations.All-in sustaining costs per ounce is arrived at by dividing the dollar value of the sum of these cost metrics, by the ounces of gold sold.

 

Average number of employees:The monthly average number of production andnon-production employees and contractors employed during the year, where contractors are defined as individuals who have entered into a fixed-term contract of employment with a group company or subsidiary. Employee numbers of joint ventures represents the group’s attributable share.

 

Capital expenditure:Total capital expenditure on tangible assets.

 

Effective tax rate:Current and deferred taxation charge for the year as a percentage of profit before taxation.

 

Rated bonds:The $700 million 5.375 percent bonds due 2020, $300 million 6.5 percent bonds due 2040 and the $750 million 5.125 percent bonds due 2022.

 

Region:Defines the operational management divisions within AngloGold Ashanti Limited, namely South Africa, Continental Africa (DRC, Ghana, Guinea, Mali and Tanzania), Australasia, and the Americas (Argentina and Brazil).

 

Related party:Parties are considered related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

 

Significant influence:The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decision of an entity so as to obtain economic benefit from its activities.

 

Stay in business capital:Capital expenditure to extend useful lives of existing production assets. This includes replacement of vehicles, plant and machinery, Ore Reserve development, deferred stripping and capital expenditure related to financial benefit initiatives, safety, health and the environment.

 

Strate:The licensed Central Securities Depository (CSD) for the electronic settlement of financial instruments in South Africa.

 

Total cash costs:Total cash costs include site costs for all mining, processing and administration, reduced by contributions fromby-products and are inclusive of royalties and production taxes. Depreciation, depletion and amortisation, rehabilitation, corporate administration, employee severance costs, capital and exploration costs are excluded. Total cash costs per ounce are the attributable total cash costs divided by the attributable ounces of gold produced.

 

Total production costs:Total cash costs plus depreciation, depletion and amortisation, employee severance costs, rehabilitation and othernon-cash costs. Corporate administration and exploration costs are excluded. Total production costs per ounce are the attributable total production costs divided by the attributable ounces of gold produced.

 

Weighted average number of ordinary shares:The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, weighted on a time basis for the period during which they have participated in the income of the group, and increased by share options that are virtually certain to be exercised.

 

 

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Currencies

 

$, US$ or dollar

  

United States dollars

    

ARS

  

Argentinean peso

    

A$ or AUD

  

Australian dollars

    

BRL

  

Brazilian real

    

or Euro

  

European Euro

    

GHC, cedi or Gh¢

  

Ghanaian cedi

    

Tsh

  

Tanzanian Shillings

    

ZAR, R or rand

  

South African rands

    

 

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Table of Contents

Abbreviations

 

ADR

  

American Depositary Receipt

ADS

  

American Depositary Share

AIFR

  

All injury frequency rate

ASX

  

Australian Securities Exchange

Au

  

Contained gold

BBSY

  

Bank Bill Swap Bid Rate

BEE

  

Black Economic Empowerment

bn

  

Billion

CDI

  

Chess Depositary Interests

CHESS

  

Clearing House Electronic Settlement System

CLR

  

Carbon Leader Reef

CR

  

Crystalkop Reef

DMTNP

  

Domestic medium-term notes programme

DRC

  

Democratic Republic of the Congo

ERP

  

Enterprise resource planning

G or g

  

Grams

GhDS

  

Ghanaian Depositary Share

GhSE

  

Ghana Stock Exchange

IASB

  

International Accounting Standards Board

IFRS

  

International Financial Reporting Standards as issued by the IASB

JIBAR

  

Johannesburg Interbank Agreed Rate

JORC

  

Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves

JSE

  

JSE Limited (Johannesburg Stock Exchange)

King III

  

The King Code on Corporate Governance for South Africa

Kg or kg

  

Kilograms

Km or km

  

Kilometres

Km2

  

Squared kilometres

Koz

  

Thousand ounces

LIBOR

  

London Interbank Offer Rate

M or m

  

Metre or million, depending on the context

Moz

  

Million ounces

Mt

  

Million tonnes or tons

Mtpa

  

Million tonnes/tons per annum

NYSE

  

New York Stock Exchange

Oz or oz

  

Ounces (troy)

oz/t

  

Ounces per ton

oz/TEC

  

Ounces per total employee costed

SAMREC

  

South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves

SEC

  

United States Securities and Exchange Commission

The Companies Act

  

South African Companies Act, No. 71 of 2008, as amended

T or t

  

Tons (short) or tonnes (metric)

Tpa or tpa

  

Tonnes/tons per annum

US/USA/United States

  

United States of America

VR

  

Vaal Reef

VCR

  

Ventersdorp Contact Reef

Note:Rounding of figures in this report may result in computational discrepancies.

 

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PART I

ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3: KEY INFORMATION

 

3A.

SELECTED FINANCIAL DATA

The selected financial information set forth below for the years ended and as at 31 December 2016, 2015 and 2014 has been derived from, and should be read in conjunction with, the IFRS financial statements included under Item 18 of this annual report. The selected financial information for the years ended and as at 31 December 2013 and 2012 has been derived from the IFRS financial statements not included in this annual report.

 

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    Year ended 31 December 
   2016  2015  2014  2013  2012 
   $  $  $  $  $ 
    (in millions, except share and per share amounts) 

Consolidated income statement

      

Revenue

   4,254   4,174   5,110   5,383   6,222 

Gold income

   4,085   4,015   4,952   5,172   5,943 

Cost of sales

   (3,263  (3,294  (3,972  (3,947  (3,765

Gain (loss) onnon-hedge derivatives and other commodity contracts

   19   (7  13   94   (36

Gross profit

   841   714   993   1,319   2,142 

Corporate administration, marketing, other expenses and other income

   (61  (78  (92  (201  (288

Exploration and evaluation costs

   (133  (132  (142  (250  (390

Other operating expenses

   (110  (96  (28  (19  (47

Special items

   (42  (71  (260  (2,951  (402

Operating profit (loss)

   495   337   471   (2,102  1,015 

Dividends received

   -   -   -   5   7 

Interest received

   22   28   24   39   43 

Exchange (loss) gain

   (88  (17  (7  14   8 

Finance costs and unwinding of obligations

   (180  (245  (276  (293  (228

Fair value adjustment on issued bonds

   9   66   (17  307   245 

Share of associates and joint ventures’ profit (loss)

   11   88   (25  (162  (30

Profit (loss) before taxation

   269   257   170   (2,192  1,060 

Taxation

   (189  (211  (225  237   (285

Profit (loss) after taxation from continuing operations

   80   46   (55  (1,955  775 

Discontinued operations

      

(Loss) profit from discontinued operations

   -   (116  16   (245  140 

Profit (loss) for the year

   80   (70  (39  (2,200  915 

Allocated as follows

      

Equity shareholders

      

- Continuing operations

   63   31   (74  (1,985  757 

- Discontinued operations

   -   (116  16   (245  140 

Non-controlling interests

       

- Continuing operations

   17   15   19   30   18 
   80   (70  (39  (2,200  915 

Basic earnings (loss) per ordinary share (cents)

   15   (20  (14  (568  232 

Earnings (loss) per ordinary share from continuing operations

   15   8   (18  (506  196 

(Loss) earnings per ordinary share from discontinued operations

   -   (28  4   (62  36 

Diluted earnings (loss) per ordinary share (cents)

   15   (20  (14  (631  177 

Earnings (loss) per ordinary share from continuing operations

   15   8   (18  (571  144 

(Loss) earnings per ordinary share from discontinued operations

   -   (28  4   (62  33 

Dividend per ordinary share (cents)

   -   -   -   10   56 

 

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    As at 31 December 
   2016  2015  2014  2013  2012 
   $  $  $  $  $ 
    (in millions, except share and per share amounts) 

Consolidated balance sheet data

      

ASSETS

      

Non-current assets

      

Tangible assets

   4,111   4,058   4,863   4,815   7,776 

Intangible assets

   145   161   225   267   315 

Investments in associates and joint ventures

   1,448   1,465   1,427   1,327   1,047 

Other investments

   125   91   126   131   167 

Inventories

   84   90   636   586   610 

Trade, other receivables and other assets

   34   13   20   29   79 

Deferred taxation

   4   1   127   177   97 

Cash restricted for use

   36   37   36   31   29 

Othernon-current assets

   -   18   25   41   7 
   5,987   5,934   7,485   7,404   10,127 

Current assets

      

Other investments

   5   1   -   1   - 

Inventories

   672   646   888   1,053   1,213 

Trade, other receivables and other assets

   255   196   278   369   472 

Cash restricted for use

   19   23   15   46   35 

Cash and cash equivalents

   215   484   468   648   892 
   1,166   1,350   1,649   2,117   2,612 

Non-current assets held for sale

   -   -   -   153   - 
   1,166   1,350   1,649   2,270   2,612 

Total assets

   7,153   7,284   9,134   9,674   12,739 

EQUITY AND LIABILITIES

      

Share capital and premium

   7,108   7,066   7,041   7,006   6,742 

Accumulated losses and other reserves

   (4,393  (4,636  (4,196  (3,927  (1,269

Shareholders’ equity

   2,715   2,430   2,845   3,079   5,473 

Non-controlling interests

   39   37   26   28   21 

Total equity

   2,754   2,467   2,871   3,107   5,494 

Non-current liabilities

      

Borrowings

   2,144   2,637   3,498   3,633   2,724 

Environmental rehabilitation and other provisions

   877   847   1,052   963   1,238 

Provision for pension and post-retirement benefits

   118   107   147   152   221 

Trade, other payables and deferred income

   4   5   15   4   10 

Derivatives

   -   -   -   -   10 

Deferred taxation

   496   514   567   579   1,084 
   3,639   4,110   5,279   5,331   5,287 

Current liabilities

      

Borrowings

   34   100   223   258   859 

Trade, other payables and deferred income

   615   516   695   820   979 

Bank overdraft

   -   -   -   20   - 

Taxation

   111   91   66   81   120 
   760   707   984   1,179   1,958 

Non-current liabilities held for sale

   -   -   -   57   - 
   760   707   984   1,236   1,958 

Total liabilities

   4,399   4,817   6,263   6,567   7,245 

Total equity and liabilities

   7,153   7,284   9,134   9,674   12,739 

Number of ordinary shares as adjusted to reflect changes in share capital

   408,223,760   405,265,315   404,010,360   402,628,406   383,320,962 

Share capital (exclusive of long-term debt and redeemable preference shares)

   16   16   16   16   16 

Net assets

   2,754   2,467   2,871   3,107   5,494 

 

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Annual dividends

The table below sets forth the amounts of interim, final and total dividends declared in respect of the past five years in cents per ordinary share.

 

  Year ended 31 December(1)    2016     2015     2014     2013     2012 

  South African cents per ordinary share

                    

  First quarter

     -      -      -      50      200 

  Second quarter

     -      -      -      50      100 

  Third quarter

     -      -      -      -      100 

  Fourth quarter

     -      -      -      -      50 

  Total

     -      -      -      100      450 

  US cents per ordinary share(2)

                    

  First quarter

     -      -      -      5      26 

  Second quarter

     -      -      -      5      12 

  Third quarter

     -      -      -      -      12 

  Fourth quarter

     -      -      -      -      6 

  Total

     -      -      -      10      56 

 

(1)

During 2013, the Company changed the frequency of dividend payments to be dependent upon the board’s ongoing assessment of AngloGold Ashanti’s earnings.

(2)

Dividends for these periods were declared in South African cents. US dollar cents per share figures have been calculated based on exchange rates prevailing on each of the respective payment dates.

For further information on the company’s policy on dividend distributions, see “Item 8A: Consolidated Financial Statements and Other Information—Dividends”.

Exchange rate information

The following table sets forth, for the periods and dates indicated, certain information concerning US dollar/South African rand exchange rates expressed in rands per $1.00. On 22 March 2017, the interbank rate between South African rands and US dollars as reported by Reuters was 12.57 /$1.00.

 

  Year ended 31 December(2)    High     Low     Year end     Average (1) 

  2012

     8.95      7.46      8.47      8.20 

  2013

     10.51      8.47      10.49      9.63 

  2014

     11.69      10.28      11.60      10.84 

  2015

     15.87      11.36      15.53      12.77 

  2016

     16.87      13.18      13.73      14.68 

  2017(3)

     13.82      12.56             13.26 

 

(1)

The average rate of exchange on the last business day of each month during the year.

(2)

Based on the interbank rate as reported by Reuters.

(3)

Through to 22 March 2017.

 

  Exchange rate information for the months of (1)    High     Low 

  September 2016

     14.59      13.44 

  October 2016

     14.36      13.46 

  November 2016

     14.47      13.18 

  December 2016

     14.12      13.46 

  January 2017

     13.82      13.23 

  February 2017

     13.46      12.90 

  March 2017(2)

     13.33      12.56 

 

(1)

Based on the interbank rate as reported by Reuters.

(2)

Through to 22 March 2017.

 

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3B.

CAPITALISATION AND INDEBTEDNESS

Not applicable.

 

3C.

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

 

3D.

RISK FACTORS

This section describes many of the risks that could affect AngloGold Ashanti. There may, however, be additional risks unknown to AngloGold Ashanti and other risks, currently believed to be immaterial, that could turn out to be material. Additional risks may arise or become material subsequent to the date of this document. These risks, either individually or simultaneously, could significantly affect the group’s business, financial results and the price of its securities.

Risks related to AngloGold Ashanti’s results of operations and financial condition as a result of factors that impact the gold mining industry generally.

Commodity market price fluctuations could adversely affect the profitability of operations.

AngloGold Ashanti’s revenues are primarily derived from the sale of gold and, to a lesser extent, uranium, silver and sulphuric acid. The company’s current policy is to sell its products at prevailing market prices and not to enter into price hedging arrangements. The market prices for these commodities fluctuate widely. These fluctuations are caused by numerous factors beyond the company’s control. For example, the market price of gold may change for a variety of reasons, including:

 

speculative positions taken by investors or traders in gold;

 

monetary policies announced or implemented by central banks, including the U.S. Federal Reserve;

 

changes in the demand for gold as an investment or as a result of leasing arrangements;

 

changes in the demand for gold used in jewellery and for other industrial uses, including as a result of prevailing economic conditions;

 

changes in the supply of gold from production, divestment, scrap and hedging;

 

financial market expectations regarding the rate of inflation;

 

the strength of the U.S. dollar (the currency in which the gold price trades internationally) relative to other currencies;

 

changes in interest rates;

 

actual or anticipated sales or purchases of gold by central banks and the International Monetary Fund (IMF);

 

gold hedging andde-hedging by gold producers;

 

global or regional political or economic events; and

 

the cost of gold production in major gold producing countries.

The market price of gold has been and continues to be significantly volatile. During 2016, the gold price traded from a low of $1,060.24 per ounce to a high of $1,374.91 per ounce, remaining well below a peak of $1,900 per ounce in September 2011. Between 1 January 2017 and 22 March 2017, the gold price traded between a low of $1,163.40 per ounce and a high of $1,256.56 per ounce. On 22 March 2017 the afternoon price for gold on the London Bullion Market was $1,249.05 per ounce. In addition to protracted declines such as the one experienced from 2011 through 2015, the price of gold is also often subject to sharp, short-term changes. For example, during thethree-day period from Friday, 12 April 2013, to Monday, 15 April 2013, the price of gold fell by $228 per ounce. Additionally, the spot price of gold fell by more than four percent to $1,086 per ounce in overnight trading on 20 July 2015 after traders sold 57 tonnes of gold in Shanghai and New York. By taking the price of gold below $1,100 per ounce, the July 2015sell-off triggered a high volume of stop-loss orders that had been put in place by traders to automatically sell when the gold price reached a predetermined level. This caused the gold price to drop further. Any sharp or prolonged fluctuations in the price of gold can have a material adverse impact on the company’s profitability and financial condition.

 

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Central banks’ policies can affect the price of gold. If gold is treated as a safe alternative investment during economic downturns, the price of gold may fall when central banks end quantitative easing or increase interest rates. For example, the price of gold fell to annual lows when the Chairman of the U.S. Federal Reserve announced a reduction in quantitative easing in June 2013, the end of the quantitative easing programme in October 2014 and an increase in interest rates in December 2015. Similarly, gold prices continued on a downward trend after the Chairman’s announcement of an increase in interest rates in December 2016. However, the gold price has generally increased since the beginning of 2017 despite the Chairman’s announcement of another interest rate increase in March of 2017 and may continue to be unpredictable. Any future announcements or proposals by the U.S. Federal Reserve, or any of its board members or regional presidents or other similar officials in other major economies may materially and adversely affect the price of gold and, as a result, AngloGold Ashanti’s financial condition and results of operations.

Whilst overall supply and demand typically do not affect the gold price in the same manner or to the same degree as other commodities due to the considerable size of historical mined stocks of gold, events that affect supply and demand may nonetheless have an impact. According to the World Gold Council, demand for gold is generally driven by four main sectors, namely jewellery, investment, central banks and technology. The market for gold bullion bar, AngloGold Ashanti’s primary product, is generally limited to bullion banks, the number of which has declined in recent years. Central banks’ purchases can be adversely affected by declines in foreign exchange reserves. For example, this was one of the factors that drove a 33 percent decline in net gold purchases by central banks in 2016 compared to 2015. Demand for gold is also largely impacted by trends in China and India, which account for the highest gold consumption worldwide. Demand for gold may be particularly affected by government policies in these countries. For example, according to the World Gold Council, gold demand in China fell 38 percent in 2014 compared to 2013 and demand for gold bars and coins fell by 50 percent due in part to the government’s anti-corruption programme, which put limited pressure on demand for gold ornaments andso-called “gift bars”. In India, government intervention to try to reduce the trade deficit, a material portion of which is linked to gold imports, led to various import taxes being introduced, which unsettled the domestic market for gold in 2016. The Indian government also introduced measures in 2016 to reduce undeclared income, including a demonetisation policy put in place in November 2016. Although gold imports temporarily increased when the Indian government announced its decision to retire the500-rupee and1,000-rupee bank notes, assoon-to-be obsolete notes were used to buy gold, gold imports registered a 55 percent decline by value the following month due to the lack of liquidity resulting from the demonetisation. These and similar policies in India, China or other large gold-importing countries could adversely affect demand for, and consequently prices of, gold.

Furthermore, the shift in demand from physical gold to gold-related investments and speculative instruments may exacerbate the volatility of the gold price. For example, the Finance Ministry in India announced an offering of sovereign gold bonds as an alternative to the purchase of physical gold in March 2015 and conducted severalfollow-on offerings in 2016. This and other policies of the Indian government contributed to a 22 percent decline in gold jewellery demand in India between 2015 and 2016. Slower consumption of physical gold in India, resulting from a move toward gold-tracking investments or otherwise, may have an adverse impact on global demand for, and prices of, bullion.

A sustained period of significant gold price volatility may adversely affect the company’s ability to evaluate the feasibility of undertaking new capital projects or the continuity of existing operations, to meet its operational targets or to make other long-term strategic decisions. Lower and more volatile gold prices, together with other factors, have led AngloGold Ashanti to alter its expansion and development strategy and consider ways to align its asset portfolio to take account of such expectations and trends. As a result, the company may decide to curtail or temporarily or permanently shut down certain of its exploration and production operations, which may be difficult and costly to effect. A further sustained decrease in the price of gold could also have a material adverse effect on AngloGold Ashanti’s financial condition and results of operations, as it may be unable to quickly adjust its cost structure to reflect the reduced gold price environment. Mines with marginal headroom may be subject to decreases in value that are other than temporary, which may result in impairment losses. See “—Certain factors may affect AngloGold Ashanti’s ability to support the carrying amount of its property, plant and equipment, intangible assets and goodwill on the balance sheet. If the carrying amount of its assets is not recoverable, AngloGold Ashanti may be required to recognise an impairment charge, which could be significant.” The market value of gold inventory may be reduced and marginal stockpile and heap leach inventories may be written down to net realisable value or may not be processed further as it may not be economically viable at lower gold prices. In addition, AngloGold Ashanti is obliged to meet certain financial covenants under the terms of its borrowing facilities and its ability to continue to meet these covenants could be adversely affected by a further sustained decrease in the price of gold. The use of lower gold prices in Ore Reserve estimates and life of mine plans could also result in material impairments of the company’s investment in mining properties or a reduction in its Ore Reserves estimates and corresponding restatements of its Ore Reserves and increased amortisation, reclamation and closure charges.

 

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The spot price of uranium has been volatile in past years. During 2016, the price varied between a low of approximately $18 per pound and a high of $35 per pound. On 22 March 2017, the spot price of uranium was $24.50 per pound. In 2016, high inventory levels, an increase in the use of uranium enrichment at the expense of mined uranium and a slowdown in China’s uranium purchases caused uranium prices to continue aten-year decline. Uranium prices can also be affected by several other factors, including demand for nuclear reactors, uranium production shortfalls and restocking by utilities. Additionally, events like those surrounding the earthquake and tsunami that occurred in Japan in 2011 can have a material adverse impact on the price of and demand for uranium.

The price of silver has also experienced significant fluctuations in past years. During 2016, the price varied from a low of $13.71 per ounce in January 2016 to a high of $21.10 per ounce in July 2016. On 22 March 2017, the price of silver was $17.50 per ounce. Factors affecting the price of silver include investor demand, physical demand for silver bars, industrial and retailoff-take, and silver coin minting.

If revenue from sales of gold, uranium, silver or sulphuric acid falls below their respective cost of production for an extended period, AngloGold Ashanti may experience losses and curtail or suspend some or all of its exploration projects and existing operations or sell underperforming assets. Declining commodities prices may also force a reassessment of the feasibility of a particular project or projects, which could cause substantial delays or interrupt operations until the reassessment can be completed.

Foreign exchange fluctuations could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.

Gold is principally a U.S. dollar-priced commodity and most of the company’s revenues are realised in, or linked to, U.S. dollars, whilst cost of sales are largely incurred in the local currency where the relevant operation is located. Given the company’s global operations and local foreign exchange regulations, some of its funds are held in local currencies, such as the South African rand, Ghanaian cedi, Brazilian real, Argentinian peso and the Australian dollar. The weakness of the U.S. dollar against local currencies results in higher cost of sales in U.S. dollar terms. Conversely, the strengthening of the dollar lowers local cost of sales in U.S. dollar terms.

From time to time, AngloGold Ashanti may implement currency hedges intended to reduce exposure to changes in the foreign currency exchange. Such hedging strategies may not however be successful, and any of AngloGold Ashanti unhedged exchange payments will continue to be subject to market fluctuations.

Exchange rate movements may have a material impact on AngloGold Ashanti’s operating results. For example, based on average exchange rates received in 2016, the company estimates that a one percent strengthening of all of the South African rand, Brazilian real, the Argentinian peso or the Australian dollar against the U.S. dollar will, other factors remaining equal, result in an increase in total cash costs of approximately $6 per ounce.

The profitability of mining companies’ operations and the cash flows generated by these operations are significantly affected by fluctuations in input production prices, many of which are linked to the prices of oil and steel.

Fuel, energy and consumables, including diesel, heavy fuel oil, chemical reagents, explosives, tyres, steel and mining equipment consumed in mining operations form a relatively large part of the operating costs and capital expenditure of any mining company.

AngloGold Ashanti has no influence over the cost of these consumables, many of which are linked to some degree to the price of oil and steel. Whilst, from time to time, AngloGold Ashanti may implement diesel hedges intended to reduce exposure to changes in the oil price, such hedging strategies may not always be successful, and any of the company’s unhedged diesel consumption will continue to be subject to market fluctuations.

The price of oil has been volatile, fluctuating between $25 and $55 per barrel of Brent Crude in 2016. As of 22 March 2017, the price of oil was at $49.46 per barrel of Brent Crude. AngloGold Ashanti estimates that for each U.S. dollar per barrel rise or fall in the oil price, other factors remaining equal, total cash costs of all its operations change by approximately $0.76 per ounce. The total cash costs of certain of the company’s mines, particularly Sadiola, Siguiri, Geita, and Tropicana are most sensitive to changes in the price of oil. Even when fuel prices are in decline, expected savings may be partly offset by increases in governments’ fixed fuel levies or the introduction by governments of new levies. For example, in Tanzania, the government introduced a levy charged at 1.5 percent of the price including Cost, Insurance and Freight of fuel, earmarked for railway infrastructure development, effective 1 July 2015. This resulted in an additional annual cost impact at AngloGold Ashanti’s Geita mine of approximately $2.7 million in 2016 and is expected to have a similar annual cost impact going forward.

 

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Furthermore, the price of steel has also been volatile. Steel is used in the manufacture of most forms of fixed and mobile mining equipment, which is a relatively large contributor to the operating costs and capital expenditure of a mine. For example, in 2016 the price of flat hot rolled coil (North American Domestic FOB) steel traded between $379 per tonne as of 1 January 2016 and $630 per tonne as of 29 June 2016. On 22 March 2017, the price of flat hot rolled coil (North American Domestic FOB) was $648 per tonne.

Fluctuations in oil and steel prices have a significant impact on operating costs and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining projects or render certain projectsnon-viable, which could have a material adverse impact on the company’s results of operations and financial condition.

Energy cost increases and power fluctuations and stoppages could adversely impact the company’s results of operations and financial condition.

Increasing global demand for energy, concerns about nuclear power and the limited growth of new supply are impacting the price and supply of energy. The transition of emerging markets to higher energy consumption, actual and proposed taxation of carbon emissions as well as unrest and potential conflict in the Middle East, amongst other factors, could result in increased demand or constrained supply and sharply escalating oil and energy prices.

AngloGold Ashanti’s mining operations are substantially dependent upon electrical power generated by local utilities or by power plants situated at some of its operations. The unreliability of these local sources of power can have a material effect on the company’s operations, as large amounts of power are required for ventilation, exploration, development, extraction, processing and other mining activities on the company’s properties.

In South Africa, the company’s operations are dependent on electricity supplied by a parastatal agency of Eskom, a state-owned power generation company. Although other competitors in the renewable energy market have now entered the power supply market, the power supply is still channelled through the Eskom infrastructure. Electricity is used for most of our business and safety-critical operations, including cooling, hoisting and dewatering. Loss of power can therefore impact production and employee safety, and prolonged outages could lead to flooding of workings and ore sterilisation. In 2008, Eskom and the South African government declared a national emergency and warned that they could no longer guarantee the availability of electricity due to a national supply shortage which at the time was blamed on coal supply shortages, heavy rain fall and unplannedgeneration-set outages as a result of maintenance backlog and asset age. The entire country went into a programme of rolling blackouts and AngloGold Ashanti and other mining companies operating in South Africa were forced in late January untilmid-March of 2008 to temporarily suspend mining operations.

A warning of the “very high” risk of blackouts was reissued at the start of 2011 and each year until 2015. On 20 February 2014, Eskom declared a power emergency pursuant to its regulatory protocols to protect the national electricity grid. The power emergency was caused by the loss of additional generating units, a 1,500MW reduction in imported electricity resulting from the failure of power lines at the Cahora Bassa hydro scheme in Mozambique and the extensive use of emergency reserves. Eskom alerted key industrial customers, including AngloGold Ashanti, asking them to reduce their load by a minimum of 10 percent during critical periods. Since February 2014, AngloGold Ashanti has reduced its electricity consumption in South Africa by more than 10 percent measured in Gigawatt hour usage. In November 2014, Eskom reintroduced a schedule of rolling blackouts, or “load shedding”. Although the last blackout was imposed in 2015, Eskom cannot guarantee that there will be no power interruptions in the future. Management expects that these interruptions may resume in the future.

Furthermore, the power supply to the company’s South African operations has been and may be load curtailed or interrupted again in the future for other reasons. For example, lightning or other damage to power stations can also result in power interruptions at the company’s operations. In this regard, AngloGold Ashanti’s two main operational sites in the West Wits region in South Africa experienced power reductions between 13 March 2013 and 15 March 2013 after a fire caused severe damage to the 500MVA transformers situated close to the main road passing through the West Rand area.

Eskom and the National Energy Regulator of South Africa (NERSA) recognise the need to increase electricity supply capacity, and a series of tariff increases and proposals have been enacted since 2010 to assist in the funding of this expansion. In 2013, NERSA announced that Eskom would be allowed to increase electricity tariffs for the five-year period that began in April 2013 at an average yearly increase of 8 percent, which was half of that sought by the utility in its application. However, in October 2014, NERSA granted a 12.69 percent increase in electricity prices with effect from April 2015. In early 2016, NERSA heard a second application from Eskom to increase tariffs and an increase of 9.4 percent was granted, effective 1 April 2016. Although a lower increase of 2.2 percent was approved in February 2017, effective 1 April 2017, greater tariff increases may be imposed

 

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in future years. Instability in the industry is further exacerbated by uncertainty around the approval, cost and continuation of a nuclear energy programme and additional delays expected in connection with the completion of the Medupi and Ingula coal power stations.

There can be no assurance as to the existence or nature of any government intervention with respect to tariff increases in the future. Other difficulties at Eskom, relating to a large financial deficit, may result in additional tariff increases. As energy represents a large proportion of the company’s operating costs in South Africa, these increases have had, and any future increases will have, a materially adverse impact on the total cash costs of its South African operations.

The company has also identified a risk of energy shortages in Ghana and Brazil. The company’s mining operations in Ghana depend on hydroelectric power supplied by the state-controlled Volta River Authority (VRA), which is supplemented by thermal power from the Takoradi plant and a smaller unit at Tema. AngloGold Ashanti negotiates rates directly with the VRA to power the Obuasi mining operations and the VRA may not agree to a satisfactory rate during future rounds of negotiations. AngloGold Ashanti procures electricity for Iduapriem from the Electricity Company of Ghana (ECG) which is supplied by the VRA.

Ghana has a major power generation deficit that has resulted in significant load shedding across the country. For example, the company experienced extended power interruptions in Ghana in the first quarter of 2014, which limited access to higher grade areas. It also experienced frequent load shedding at Iduapriem in 2015, at times experiencing multiple outages in a single day. During periods of below average inflows from the Volta reservoir, electricity supplies from the Akosombo Dam, the VRA’s primary generation source, may be curtailed as occurred in 1998, 2003, 2006, 2007 and 2016. During periods of limited electricity availability, the grid is subject to disturbances and voltage fluctuations which can damage equipment. Disruptions in the natural gas supply from Nigeria in March 2015, via the West Africa Gas Pipeline, have led to some reduction in thermal generation capacity and the use of more expensive light crude oil, which is putting upward pressure on power tariffs. In the past, the VRA has obtained power from neighbouring Côte d’Ivoire, which has intermittently experienced political instability and civil unrest.

In Brazil, atwo-year drought in 2014 and 2015 adversely affected hydro-electrical power generation. Similar water shortages in the future could have an adverse impact on AngloGold Ashanti’s operations in Brazil.

The company’s mining operations in Guinea, Tanzania and Mali are dependent on power supplied by outside contractors and supplies of fuel are delivered by road. Power supplies have been disrupted in the past, resulting in production losses due to equipment failure.

Increased energy prices could negatively impact operating costs and cash flow of AngloGold Ashanti’s operations.

Global economic conditions could adversely affect the profitability of operations.

AngloGold Ashanti’s operations and performance depend significantly on worldwide economic conditions. Despite signs of economic recovery in certain geographic markets, global financial markets have experienced considerable volatility from uncertainty surrounding the level and sustainability of the sovereign debt of various countries. Concerns remain regarding the sustainability of the European Monetary Union and its common currency, the Euro, in their current form, particularly following the vote in favour of the United Kingdom’s exit from the European Union in June 2016 and in light of elections to be held in several European countries in 2017. Concerns also exist regarding the negative impacts of the downgrade of the sovereign credit rating of the Republic of South Africa in 2012, 2013, 2014 and 2015. During 2016, rating agencies warned that weak South African economic growth, government bailouts of state-owned companies and an unfavourable political environment could lead to a downgrade of the sovereign credit rating of the Republic of South Africa below investment grade in 2017.

These conditions and other disruptions to international credit markets and financial systems caused a loss of investor confidence and resulted in widening credit spreads, a lack of price transparency, increased credit losses and tighter credit conditions. Although aggressive measures taken by governments, the private sector and central banks have resulted in a modest economic recovery since 2012, any such recovery may remain limited in geographic scope. A significant risk also remains that this recovery could be slow or that the global economy could quickly fall back into an even deeper and longer lasting recession or even a depression. In 2014 and 2015, the credit ratings of some of the largest South African banks were downgraded by major credit rating agencies. Any significant weakening of the South African banking system could have a negative effect on the overall South African economy.

 

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Global economic turmoil, or the expectation that economic turmoil could worsen, could havefollow-on effects on AngloGold Ashanti’s business that include inflationary cost pressures, interest rate fluctuations and commodity market fluctuations. Other effects that could negatively affect AngloGold Ashanti’s financial results and results of operations include, for example:

 

the insolvency of key suppliers or contractors, which could result in contractual breaches and a supply chain breakdown;

 

the insolvency of one or more joint venture partners, which could result in contractual breaches and disruptions at the operations of the company’s joint ventures;

 

changes in other income and expense, which could vary materially from expectations, depending on gains or losses realised on the sale or exchange of financial instruments and impairment charges that may be incurred with respect to investments;

 

the inability of AngloGold Ashanti’s defined benefit pension fund to achieve expected returns on its investments, which could require the company to make substantial cash payments to fund any resulting deficits;

 

a reduction in the availability of credit, which may make it more difficult for the company to obtain financing for its operations and capital expenditures or make that financing more costly;

 

exposure to the liquidity and insolvency risks of the company’s lenders and customers; and

 

impairments.

In addition to the potentially adverse impact on the profitability of the company’s operations, any deterioration in or increased uncertainty regarding global economic conditions may increase volatility or negatively impact the market value of AngloGold Ashanti’s securities.

Inflation may have a material adverse effect on results of operations.

Many of AngloGold Ashanti’s operations are located in countries that have experienced high rates of inflation during certain periods. It is possible that significantly higher future inflation in the countries in which the company operates may result in an increase in operational costs in local currencies (without a concurrent devaluation of the local currency of operations against the dollar or an increase in the dollar price of gold). This could have a material adverse effect on the company’s results of operations and financial condition. Significantly higher and sustained inflation, with a consequent increase in operational costs, could result in the rationalisation (including closure) of higher cost mines or projects.

Of particular concern is the inflation rate in Argentina which increased from an average of 10 percent in 2012 to 40.5 percent in 2016. Using IMF and National Wholesale Price Index data, AngloGold Ashanti has determined that Argentina was not highly inflationary for the year ended 31 December 2016. If inflation reaches highly inflationary levels, social unrest and union activity may increase in Argentina, and this may have an adverse effect on AngloGold Ashanti’s operational costs and results of operation.

Mining companies face many risks related to the development of mining projects that may adversely affect the company’s results of operations and profitability.

Development of AngloGold Ashanti’s mining projects may be subject to unexpected problems and delays that could increase the development and operating costs of the relevant project. In addition, a decrease in budgets relating to current or medium-term exploration and development could increase its development and operating costs in the long-term.

There are a number of uncertainties inherent in the development and construction of a new mine or the extension of an existing mine. These uncertainties include the:

 

timing and cost of construction of mining and processing facilities, which can be considerable;

 

availability and cost of mining and processing equipment;

 

availability and cost of skilled labour, power, water and transportation;

 

availability and cost of appropriate smelting and refining arrangements;

 

applicable requirements under national and municipal laws and time needed to obtain the necessary environmental and other governmental permits; and

 

availability of funds to finance construction, development and environmental rehabilitation activities.

The remote location of many mining properties, permitting requirements and/or delays, third-party legal challenges to individual mining projects and broader social or political opposition to mining may increase the cost, timing and complexity of mine development and construction. New mining operations could experience unexpected problems and delays during the development, construction, commissioning and commencement of production.

 

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For example, AngloGold Ashanti may prove unable to successfully develop the La Colosa and Gramalote projects and the Nuevo Chaquiro deposit that is part of the Quebradona project in Colombia as well as other potential exploration sites due to difficulties that could arise in relation to, for example, social and community opposition, litigation and governmental regulatory or administrative proceedings, the classification of land covered by mining titles as environmentally-protected areas, ore body grades, definition of adequate Ore Reserves and Mineral Resources and the time taken to prove project feasibility that could result in the expiry of permits. See “—Mining companies are subject to extensive environmental laws and regulations” and “Item 8A: Legal Proceedings – Colombia”.

Accordingly, AngloGold Ashanti’s future development activities may not result in the expansion or replacement of current production, or one or more new production sites or facilities may be less profitable than anticipated or may be loss-making. The company’s operating results and financial condition are directly related to the success of its project developments. A failure in the company’s ability to develop and operate mining projects in accordance with, or in excess of, expectations could negatively impact its results of operations, as well as its financial condition and prospects.

Mining companies face uncertainty and risks in exploration, feasibility studies and other project evaluation activities.

AngloGold Ashanti must continually replace Ore Reserve depleted by mining and production to maintain or increase production levels in the long term. This is undertaken by exploration activities that are speculative in nature. The ability of the company to sustain or increase its present levels of gold production depends in part on the success of its projects and it may be unable to sustain or increase such levels.    

Feasibility studies and other project evaluation activities necessary to determine the current or future viability of a mining operation are often unproductive. Such activities often require substantial expenditure on exploration drilling to establish the presence, extent and grade (metal content) of mineralised material. AngloGold Ashanti undertakes feasibility studies to estimate the technical and economic viability of mining projects and to determine appropriate mining methods and metallurgical recovery processes. These activities are undertaken to estimate the Ore Reserve.

Once mineralisation is discovered, it may take several years to determine whether an adequate Ore Reserve exists, during which time the economic feasibility of the project may change due to fluctuations in factors that affect both revenue and costs, including:

 

future prices of metals and other commodities;

 

future foreign currency exchange rates;

 

the required return on investment as based on the cost and availability of capital; and

 

applicable regulatory requirements, including those relating to environmental or health and safety matters.

Feasibility studies also include activities to estimate the anticipated:

 

tonnages, grades and metallurgical characteristics of the ore to be mined and processed;

 

recovery rates of gold, uranium and other metals from the ore; and

 

capital expenditure and cash operating costs.

These estimates depend on assumptions made on available data. Ore Reserve estimates are not precise calculations and depend on the interpretation of limited information on the location, shape and continuity of the mineral occurrence and on available sampling results. Further exploration and feasibility studies can result in new data becoming available that may change previous Ore Reserve estimates and impact the technical and economic viability of production from the project. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of Ore Reserves resulting in revisions to previous Ore Reserve estimates. These revisions could impact depreciation and amortisation rates, asset carrying amounts and/or provisions for closure, restoration and environmental rehabilitation costs.

AngloGold Ashanti undertakes annual revisions to its Ore Reserve estimates based upon asset sales and acquisitions, actual exploration and production results, depletion, new information on geology, model revisions and fluctuations in production, forecasts of commodity prices, economic assumptions and operating and other costs. These factors may result in reductions in Ore Reserve estimates, which could adversely affectlife-of-mine plans and consequently the total value of the company’s mining asset base. Ore Reserve restatements could negatively affect the company’s results of operations, as well as its financial condition and prospects.

Due to a declining rate of discovery of new gold Ore Reserve in recent years, AngloGold Ashanti faces intense competition for

 

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the acquisition of attractive mining properties. From time to time, the company evaluates the acquisition of an Ore Reserve, development properties or operating mines, either as stand-alone assets or as part of existing companies. AngloGold Ashanti’s decision to acquire these properties has been based on a variety of factors, including historical operating results, estimates and assumptions regarding the extent of the Ore Reserve, cash and other operating costs, gold prices, projected economic returns and evaluations of existing or potential liabilities associated with the relevant property and its operations and how these factors may change in the future. Other than historical operating results, these factors are uncertain and could have an impact on revenue, cash and other operating costs, as well as the process used to estimate the Ore Reserve.

As a result of these uncertainties and declining grades, the company’s exploration and acquisitions may not result in the expansion or replacement of current production or the maintenance of its existing Ore Reserve net of production or an increase in Ore Reserve. AngloGold Ashanti’s results of operations and financial condition are directly related to the success of its exploration and acquisition efforts and the ability to replace or increase the existing Ore Reserve as it is depleted. If the company is not able to maintain or increase its Ore Reserve, its results of operations as well as its financial condition and prospects could be adversely affected.

Mining companies face many potential disruptions to their operations, which may adversely impact cash flows and overall profitability.

Gold mining is susceptible to events that may adversely impact a mining company’s ability to produce gold and meet production and cost targets. These events include, but are not limited to:

 

accidents or incidents, including due to human error, during exploration, production or transportation resulting in injury, loss of life or damage to equipment or infrastructure;

 

air, land and water pollution;

 

social or community disputes or interventions;

 

security incidents;

 

surface or underground fires or explosions;

 

electrocution;

 

falls from heights and accidents relating to mobile machinery, including shaft conveyances and elevators, drilling blasting and mining operations;

 

labour force disputes and disruptions;

 

loss of information integrity or data;

 

activities of illegal or artisanal miners;

 

shortages in material and equipment;

 

mechanical failure or breakdowns and ageing infrastructure;

 

failure of unproven or evolving technologies;

 

energy and electrical power supply interruptions or rationing;

 

unusual or unexpected geological formations, ground conditions, including lack of mineable face length andore-pass blockages;

 

water ingress and flooding;

 

process water shortages;

 

metallurgical conditions and gold recovery;

 

unexpected decline of ore grade;

 

unanticipated increases in goldlock-up and inventory levels at heap-leach operations;

 

fall-of-ground accidents in underground operations;

 

cave-ins, sinkholes, subsidence, rock falls, rock bursts or landslides;

 

failure of mining pit slopes, heap-leach facilities, water or solution dams, waste stockpiles and tailings dam walls;

 

changes to legal and regulatory requirements;

 

safety-related stoppages;

 

gold bullion or concentrate theft;

 

corruption and fraud;

 

allegations of human rights abuses;

 

seismic activity; and

 

other natural phenomena, such as floods, droughts or weather conditions, potentially exacerbated by climate change.

Any of these events could, individually or in the aggregate, have a material adverse effect on the company’s results of operations and financial condition.

Seismic activity is of particular concern in underground mining operations, particularly in South Africa due to the extent and

 

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extreme depth of mining, and also in Australia and Brazil due to the depth of mining and residual tectonic stresses. Despite modifications to mine layouts and support technology, as well as other technological improvements employed with a view to minimising the incidence and impact of seismic activity, seismic events have caused death and injury to employees and contractors as well as safety-related stoppages and may do so again in the future.

Seismic activity may also cause a loss of mining equipment, damage to or destruction of mineral properties or production facilities, monetary losses, environmental pollution and potential legal liabilities. As a result, these events may have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition. For example, a seismic event at the Savuka section at TauTona in 2016 caused the closure of haulage which is not expected to be accessible before late-2017, if at all. Additionally, in 2015, seismicity in South Africa causedfall-of-ground incidents that led to fatalities, and operations were constrained at Mponeng in the West Wits while ade-risk plan was implemented to address seismicity issues. In August 2014, mining operations at the Great Noligwa and Moab Khotsong mines were suspended following a magnitude 5.3 earthquake. In all cases, the shutdowns contributed to the decline in the operational output of the applicable mines as compared to the previous year.

In the past, floods have also disrupted the operations of some of the company’s mines. For example, unprecedented heavy rains in February and March 2011 in Australia flooded the Sunrise Dam Gold Mine and forced a temporary shutdown of operations. The flood event impacted underground production for approximately four months and open pit production for approximately six months. Despite the shutdown, full costs were incurred as the mining contractors worked on remedial activities to repair damage and rehabilitate flooded areas. The considerable remedial work required adversely impacted cash costs per ounce and the impact of the flood event and the pit wall failure together significantly reduced planned production at the plant.

Any seismic, flood or other similar events that occur in the future could have a material adverse effect on the company’s results of operations and financial condition.

Mining companies’ operations are vulnerable to infrastructure constraints.

Mining, processing, development and exploration activities depend on adequate infrastructure. Reliable rail, ports, roads, bridges, power sources, power transmission facilities and water supply are critical to the company’s business operations and affect capital and operating costs. These infrastructures and services are often provided by third parties whose operational activities are outside the control of the company.

Interferences in the maintenance or provision of infrastructure, including unusual weather phenomena, sabotage and social unrest could impede the company’s ability to deliver its products on time and adversely affect AngloGold Ashanti’s business, results of operations and financial condition.

Establishing infrastructure for the company’s development projects requires significant resources, identification of adequate sources of raw materials and supplies, and necessary cooperation from national and regional governments, none of which can be assured.

AngloGold Ashanti has operations or potential development projects in countries where government-provided infrastructure may be inadequate and regulatory regimes for access to infrastructure may be uncertain, which could adversely impact the efficient operation and expansion of its business. AngloGold Ashanti may not secure and maintain access to adequate infrastructure in the future, or it may not do so on reasonable terms.

Mining companies face strong competition.

The mining industry is competitive in all of its phases. AngloGold Ashanti competes with other mining companies and individuals for specialised equipment, components and supplies necessary for exploration and development, for mining claims and leases on exploration properties and for the acquisition of mining assets. These competitors may have greater financial resources, operational experience and technical capabilities than AngloGold Ashanti. Competition may increase AngloGold Ashanti’s cost of acquiring suitable claims, properties and assets, which could have a material adverse effect on its financial condition.

Mining companies are subject to extensive health and safety laws and regulations.

AngloGold Ashanti’s gold mining operations are subject to extensive health and safety laws and regulations in every jurisdiction in which it operates. These laws and regulations are, along with international and industry standards, designed to protect and improve the safety and health of employees and require the company to undertake and fund extensive compliance measures.

 

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From time to time, new or updated health and safety laws, regulations and standards are introduced and may be more stringent than those to which AngloGold Ashanti is currently subject. Should compliance with these laws, regulations and standards require a material increase in expenditures or material changes or interruptions to operations or production, including as a result of any failure to comply with applicable regulations, the company’s results of operations and financial condition could be adversely affected. Furthermore, AngloGold Ashanti continues to implement its enhanced safety programme, which could result in additional costs for the company.

In some of the jurisdictions in which AngloGold Ashanti operates, the government enforces compulsory shutdowns of operations to enable investigations into the cause of accidents. Certain of the company’s operations have been temporarily suspended for safety reasons in the past. In South Africa,so-called “Section 54 safety stoppages” have become a significant issue as an enforcement mechanism used by the Department of Mineral Resources Mining Inspectorate whose inspectors routinely issue such notices. For example, in 2016, 115 notices were issued that had a material adverse impact on production at the company’s mines. Section 54 safety stoppages resulted in the estimated direct loss of 47,100, 78,887 and 73,208 ounces of gold production from the South African region operations during 2014, 2015 and 2016 respectively.

AngloGold Ashanti’s reputation could be damaged by any significant governmental investigation or enforcement of health and safety laws, regulations or standards. Any of these factors could have a material adverse effect on the company’s results of operations and financial condition.

Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities. Failure to comply with these requirements can result in legal suits, additional operational costs to address violations or liabilities, investor divestment and loss of “social licence to operate”, and could adversely impact mining companies’ financial condition.

As a result of public concern about the perceived ill effects of economic globalisation, businesses in general and large multinational mining corporations in particular face increasing public scrutiny of their activities.

These businesses are under pressure to demonstrate that whilst they seek a satisfactory return on investment for shareholders, human rights are respected and other social partners, including employees, host communities and more broadly the countries in which they operate, also benefit from their commercial activities. Such pressures tend to be particularly focused on companies whose activities are perceived to have, or have, a high impact on their social and physical environment. The enhanced usage and scale of social media and otherweb-based tools to publish, share and discuss user-generated content further increases the potential spread and force of public scrutiny. The potential consequences of these pressures and the adverse publicity in cases where companies are believed not to be creating sufficient social and economic benefit may result in additional operating costs to address actual or perceived shortcomings, reputational damage, active community opposition, allegations of human rights abuses, legal suits and investor withdrawal.

Existing and proposed mining operations are often located at or near existing towns and villages, natural water courses and other infrastructure. As the impacts of dust generation, waste storage, water pollution or water shortage may be immediate and directly adverse to those communities, poor environmental management practices, or, in particular, adverse changes in the supply or quality of water can result in community protest, regulatory sanctions or ultimately in the withdrawal of community and government support for company operations. For example, opposition to mining activity in the Tolima province of Colombia, which hosts the La Colosa deposit, has centred on the perception that large-scale mining activity will have a detrimental impact on the region’s river systems. In the town of Cajamarca in the Tolima province, a popular consultation was held in which the town voted to ban new mining projects. The mayor of Cajamarca is expected to issue an administrative act which will reflect the result of the voting. AngloGold Ashanti is evaluating the consequences of the vote and the impact it may have on our ability to develop La Colosa. In the town of Piedras in the Tolima province, AngloGold Ashanti is contesting a referendum attempting to ban all mining activities in the area. See “Item 8A: Legal Proceedings”. Similar votes or referenda may be conducted in the future in these or other locations in Colombia where we have mining licenses. These votes and referenda or future votes or referenda could have an adverse impact on AngloGold Ashanti’s reputation, its ability to develop its mining concessions in Colombia, and its results of operations and financial condition.

Mining operations must be designed to minimise their impact on such communities and the environment, either by changing mining plans to avoid such impact, by modifying operations or by relocating the affected people to an agreed location. Responsive measures may also include the full restoration of livelihoods of those impacted. In addition, AngloGold Ashanti is obliged to comply with the terms and conditions of all the mining rights it holds. In this regard the Social and Labour plan provisions of its mining rights in South Africa must make provision for local economic development (LED) programmes. The LED programmes must take into account the key economic activities of the area in which AngloGold Ashanti operates its mines, the impact its mines will have on the local and labour-sending communities, various infrastructure and poverty eradication projects its mines may be supporting in connection with integrated development plans in the areas its mines operate and also must provide for measures that assist in addressing housing and living conditions of its employees.

In addition, as AngloGold Ashanti has a long history of mining operations in certain regions, issues may arise regarding historical, as well as potential future, environmental or health impacts in those areas. For example, certain parties, includingnon-governmental organisations, community groups and institutional investors, have raised concerns and, in the case of some individuals in Obuasi, threatened or commenced litigation, relating to air pollution or surface and groundwater quality, amongst other issues, in the area surrounding the company’s Obuasi and Iduapriem mines in Ghana, including potential impacts to local rivers and wells used for water from heavy metals, arsenic and cyanide as well as sediment and mine rock waste.

 

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Disputes with surrounding communities may also affect mining operations, particularly where they result in restrictions of access to supplies and to mining operations. The miners’ access to land may be subject to the rights or asserted rights of various community stakeholders, including indigenous people. Access to land and land use is of critical importance to the company for exploration and mining, as well as for ancillary infrastructure. In some cases, AngloGold Ashanti has had difficulty gaining access to new land because of perceived poor community compensation practices. For example, compensation remains a significant area of concern in Siguiri in Guinea. In 2011, a violent community protest interrupted operations for three days, which contributed to the operation’s decline in production as compared to 2010, and protests demanding employment by the communities and youth occurred again in 2016. Delays in projects attributable to a lack of community support can translate directly into a decrease in the value of a project or into an inability to bring the project to production.

The cost of measures and other issues relating to the sustainable development of mining operations could place significant demands on personnel resources, could increase capital and operating costs and could have an adverse impact on AngloGold Ashanti’s reputation, results of operations and financial condition.

Mining companies are subject to extensive environmental laws and regulations.

AngloGold Ashanti’s operations are subject to extensive environmental laws and regulations in the various jurisdictions in which it operates, in addition to international standards. These regulations and standards establish limits and conditions on the company’s ability to conduct its operations and govern, amongst other things, extraction, use and conservation of water resources; air emissions (including dust control); water treatment and discharge; regulatory and community reporting;clean-up of contamination; land use and conservation of protected areas; community health; and the generation, transportation, storage and disposal of solid and hazardous wastes, such as reagents, radioactive materials and mine tailings.

The cost of compliance with environmental laws and regulations is expected to continue to be significant to AngloGold Ashanti. AngloGold Ashanti could incur fines, penalties and other sanctions,clean-up costs and third-party claims for personal injury or property damage, suffer reputational damage, or be required to install costly pollution control equipment or to modify or suspend operations, as a result of actual or alleged violations of environmental laws and regulations or the terms of AngloGold Ashanti’s permits.    For example, the Ghana Environmental Protection Agency (Ghana EPA) permit for AngloGold Ashanti’s operations at Obuasi expired on 31 March 2014. AngloGold Ashanti filed its application for permit renewal in September 2013, six months prior to the expiry date, as required by law, by submitting an Environment Management Plan (EMP), but the Ghana EPA did not issue a new permit before the expiry date, citing uncertainties about the future of the Obuasi operation. AngloGold Ashanti has been in communication with the Ghana EPA regarding this issue. As a result of the complex challenges faced by the Obuasi mine, the company has subsequently adopted a new approach to securing the long term future of the mine. As part of this effort, on 18 July 2014 it submitted an Amendment to Programme of Mining Operations (APMO), which provides technical, environmental, financial and social details around the transition of its Obuasi operation, to the Government of Ghana and key regulators, that was approved subject to certain conditions. An amended EMP to supersede the one submitted in September 2013 was submitted at the same time to the Ghana EPA but no response has as yet been received. The company can give no assurance that the EMP will be approved in the form submitted or at all.

In addition, if AngloGold Ashanti fails to demonstrate or realise its business case for the redevelopment of the Obuasi operation, including because the company is unable to finalise a joint venture or other agreement with a partner to make the substantial investments necessary for redevelopment, to obtain the required consents, approvals or agreements for continued operation or to continue stabilising the security conditions following the withdrawal of state security protection in early 2016, AngloGold Ashanti may be forced to withdraw from the Obuasi mine on a long-term or permanent basis. See “— Illegal and artisanal mining occurs on AngloGold Ashanti’s properties, which can disrupt the company’s business and expose the company to liability.” Closure of the mine could trigger or accelerate obligations, including the conduct of environmental rehabilitation activities and/or to address historical impacts on environmental quality in the area surrounding the mine. Costs incurred by the company in excess of AngloGold Ashanti’s existing provisions for such matters could have a material adverse impact on AngloGold Ashanti’s results of operations and financial condition.

In addition, unknown environmental hazards may exist on the company’s properties which may have been caused by previous owners or operators. An incident at AngloGold Ashanti’s operations could lead to the imposition of legal obligations, including the remediation of environmental contamination and claims for property damage and personal injury from adjacent communities. Incidents at AngloGold Ashanti’s operations, or other mining companies’ operations, could result in the tightening of regulatory requirements and restrictions that are applicable to AngloGold Ashanti’s mining operations.

 

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For example, brief gold processing stoppages after environmental incidents, such as pipeline failures or deficiencies in water management systems, have occurred at AngloGold Ashanti’s Obuasi mine in Ghana. Furthermore, in 2010, following a temporary suspension of operations at the Iduapriem mine, the company, with the approval of the Ghana EPA, constructed an interim tailings storage facility for tailings deposition for a year whilst a new tailings storage facility was being constructed.

Failure to comply with applicable environmental laws and regulations may also result in the suspension or revocation of operating permits. AngloGold Ashanti’s ability to obtain and maintain permits and to successfully operate in particular communities may be adversely impacted by real or perceived effects on the environment or human health and safety associated with AngloGold Ashanti’s or other mining companies’ activities.

For example, in Colombia, various plaintiffs, including the government and various associations that represent local communities, brought legal proceedings against AngloGold Ashanti Colombia S.A. (AGAC) alleging that AGAC violated applicable environmental laws in connection with the La Colosa project. In one such proceeding, AGAC filed an action against the Colombian Department of the Environment, Housing and Territorial Development (DoE) after the DoE issued a fine of $70,000 against the company. Following a series of appeals, in January 2017 the appellate court reinstated the fine against the company. Although the amount of the fine is not significant, the finding that the company breached environmental laws could be used as the basis for legal action by the government that could prohibit AGAC from doing business with the Colombian government for a period of five years. As a result, AGAC’s three core concession contracts relating to the La Colosa project may be cancelled. AGAC would be required to abandon the La Colosa project and all other existing mining concession contracts and pending proposals for new mining concession contracts of AGAC, though not those of other companies of the AngloGold Ashanti group operating in Colombia. AGAC is currently evaluating its options with respect to this matter. Separately, on 10 October 2016, Tolima’s Administrative Court ordered that a technical study be prepared by April 2017 to determine whether the La Colosa project presents a “threat” to the environment during its exploration phase. If such threat is determined to exist, certain activities at La Colosa may be suspended. See “Item 8A: Legal Proceedings”.

Environmental laws and regulations are continually changing and are generally becoming more stringent. Changes to AngloGold Ashanti’s environmental compliance obligations or operating requirements could adversely affect the company’s rate of production and revenue. Variations in laws and regulations, assumptions made to estimate liabilities, standards or operating procedures, more stringent emission or pollution thresholds or controls, or the occurrence of unanticipated conditions, may require operations to be suspended or permanently closed, and could increase AngloGold Ashanti’s expenses and provisions. These expenses and provisions could adversely affect the company’s results of operations and financial condition.

For example, the use of hazardous materials in metallurgical processing remains under constant scrutiny. As there are few, if any, effective substitutes in extracting gold from the ore, any ban or material restrictions on the use of materials in mining operations in the jurisdictions where AngloGold Ashanti conducts its operations could adversely affect the company’s results of operations and financial condition. In addition, leaks or dischargesof- hazardous materials could result in liabilities forclean-up or personal injury that may not be covered by insurance.

AngloGold Ashanti’s operations are heavily dependent upon access to substantial volumes of water for use in the mining and extractive processes and typically are subject towater-use permits that govern usage and require, amongst other things, that mining operations maintain certain water quality upon discharge. Water quality and usage are areas of concern globally, such as with respect to the company’s mining operations in Ghana and South Africa and its exploration projects in Colombia, where there is significant potential environmental and social impact and a high level of stakeholder scrutiny. Any failure by the company to secure access to suitable water supplies, or achieve and maintain compliance with applicable requirements of the permits or licenses, could result in curtailment or halting of production at the affected operation. Incidents of water pollution or shortage can, in certain cases, lead to community protest and ultimately to the withdrawal of community and government support for AngloGold Ashanti’s operations. A failure by the company to comply with water contamination rehabilitation directives may result in further, more stringent, directives being issued against the company, which may, in some cases, result in a temporary or partial shutdown of some of the company’s operations.

Mining and mineral processing operations generate waste rock and tailings. The impact of dust generation, breach, leak, or failure of a waste rock or tailings storage facility, can be significant. An incident at AngloGold Ashanti’s operations could lead to, amongst others, obligations to remediate environmental contamination and claims for property damage and personal injury from adjacent communities. Incidents at other mining companies’ operations could result in governments tightening regulatory requirements and restricting mining activities.

 

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Mining companies are required by law to close their operations at the end of the mine life and rehabilitate the impacted areas. Estimates of the total ultimate closure, reclamation and rehabilitation costs for gold mining operations are significant and based principally onlife-of-mine profiles, changing inflation and discount rate assumptions, changing infrastructure and facilities design and current legal and regulatory requirements that may change materially. Environmental liabilities are accrued when they become known, are probable and can be reasonably estimated. Increasingly, regulators are seeking security in the form of cash collateral or bank guarantees in respect of environmental obligations. For example, in South Africa, regulations that came into effect in 2014 require mining companies to make financial provisions for rehabilitation for at least 10 years. The Department of Environmental Affairs (DEA) postponed the compliance deadline for the National Environmental Management Act (NEMA) Financial Provisioning Regulations to February 2019 and acknowledged challenges identified by the industry in collaboration with the Chamber of Mines. In the latest drafts, key issues such as the future of existing rehabilitation trust funds have been amended. The costs required to comply with these obligations and any similar ones enacted in other jurisdictions may have an adverse impact on the company’s financial condition.

AngloGold Ashanti’s provisions for decommissioning and for restoration (excluding joint ventures) totalled $851 million in 2014, $683 million in 2015 (following the sale of CC&V) and $705 million in 2016. Costs associated with rehabilitating land disturbed by mining processes and addressing environmental, health and community issues are estimated and financial provision made based upon current available information. Estimates notably relate to discount rates, which may vary due to changes in global economic assumptions, and mine plans, which may change in line with variations in cash flows, designs of tailings storage facilities and methodologies used to compute liabilities (including as a result of a request from environmental regulatory authorities). Estimates may, however, be insufficient and further costs may be identified at any stage that may exceed the provisions that AngloGold Ashanti has made. Any underestimated or unidentified rehabilitation costs would reduce earnings and could materially and adversely affect the company’s asset values, earnings and cash flows. Further, sudden changes in a life of mine plan or the accelerated closure of a mine may give rise to the recognition of liabilities that are not anticipated.

Compliance with emerging climate change regulations could result in significant costs and climate change may present physical risks to a mining company’s operations.

Greenhouse gases (GHGs) are emitted directly by AngloGold Ashanti’s operations, as well as by external utilities from which AngloGold Ashanti purchases electricity. A number of international and national measures to address or limit GHG emissions, including the 2007 Bali Action Plan and the 2009 Copenhagen Accord, which included anon-binding commitment to reduce GHG emissions, are in various phases of discussion or implementation in the countries in which the company operates. As a result of commitments made at the UN climate conference in Durban, South Africa in December 2011, certain members of the international community negotiated a treaty at the December 2015 Conference of Parties in Paris. The Paris Agreement, which will require developed countries to set targets for emissions reductions, came into force on 4 November 2016. Additional measures addressing GHG emissions may be implemented at the national or international levels. These, or future, measures could require AngloGold Ashanti to reduce its direct GHG emissions or energy use or to incur significant costs for GHG emissions permits or taxes or have these costs or taxes passed on by electricity utilities which supply the company’s operations. AngloGold Ashanti also could incur significant costs associated with capital equipment, GHG monitoring and reporting and other obligations to comply with applicable requirements.

In South Africa, a draft Carbon Tax Bill was published in November 2015. However, in February 2016, following a consultation process, it was announced that the draft bill would be revised and, in the February 2017 budget speech, the government suggested that the implementation of the carbon tax and carbon reporting requirements would be delayed until 2018. Other countries, including Brazil, have passed or are considering GHG trading or tax schemes and/or other regulation of GHG emissions, although the precise impact on AngloGold Ashanti’s operations cannot yet be determined.

In addition, AngloGold Ashanti’s operations could be exposed to a number of physical risks from climate change, such as changes in rainfall rates, rising sea levels, reduced water availability, higher temperatures and extreme weather events. Events or conditions such as flooding or inadequate water supplies could disrupt mining and transport operations, mineral processing and rehabilitation efforts, create resource shortages or damage the company’s property or equipment and increase health and safety risks on site. Such events or conditions could have other adverse effects on the company’s workforce and on the communities around its mines, such as an increased risk of food insecurity, water scarcity and prevalence of disease, all of which could have a material adverse effect on the company’s results of operations and financial condition.

Compliance with “conflict minerals” and “responsible gold” legislation and standards could result in significant costs.

Stringent standards relating to “conflict minerals” and “responsible” gold that include the U.S. Dodd-Frank Act, European proposal for self-certification for importers of gold, Organisation for Economic Cooperation and Development Due Diligence Guidelines for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, World Gold Council Conflict Free Gold Standard and London Bullion Market Association Responsible Gold Guidance have been introduced.

 

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Any such legislation and standards may result in significant costs to ensure and demonstrate compliance (particularly where standards change rapidly or lack certainty due to court challenges), and may complicate the sale of gold emanating from certain areas. The complexities of the gold supply chain, especially as they relate to “scrap” or recycled gold, and the fragmented and often unregulated supply of artisanal and small-scale mined gold are such that there may be significant uncertainties at each stage in the chain as to the provenance of the gold. As a result of the uncertainties in the process, the costs of due diligence and audit, or the reputational risks of defining their product or a constituent part as containing a “conflict mineral” may be too burdensome for the company’s customers. Accordingly, manufacturers may decide to switch supply sources or to substitute gold with other minerals not covered by the initiatives. This could have a material negative impact on the gold industry, including on AngloGold Ashanti’s financial results.

Mining operations and projects are vulnerable to supply chain disruption with the result that operations and development projects could be adversely affected by shortages of, as well as the lead times to deliver, strategic spares, critical consumables, mining equipment or metallurgical plant.

AngloGold Ashanti’s operations and development projects could be adversely affected by both shortages and long lead times to deliver strategic spares, critical consumables, mining equipment and metallurgical plant, as well as transportation delays. Import restrictions, such as those imposed by the Argentinian government from 2011 to 2015, can also delay the delivery of parts and equipment. In the past, the company and other gold mining companies experienced shortages in critical consumables, particularly as production capacity in the global mining industry expanded in response to increased demand for commodities. AngloGold Ashanti has also experienced increased delivery times for these items. Shortages have resulted in unanticipated price increases and production delays and shortfalls, resulting in a rise in both operating costs and in the capital expenditure necessary to maintain and develop mining operations.

Individually, AngloGold Ashanti and other gold mining companies have limited influence over manufacturers and suppliers of these items. In certain cases there are a limited number of suppliers for certain strategic spares, critical consumables, mining equipment or metallurgical plant who command superior bargaining power relative to the company. The company could at times face limited supply or increased lead time in the delivery of such items. For example, during 2012, supply of caustic soda was delayed in the Continental Africa Region. In addition, the unreliability of oxygen and lime supply similarly affected production at the Vaal River and West Wits surface operations in South Africa throughout 2011 and poor availability of drill rigs, heavy machinery and fleet equipment hampered underground drilling and overall operational performance at the Serra Grande mine in Brazil, also in 2011.

The company’s procurement policy is to source mining and processing equipment and consumables from suppliers that meet its corporate values and ethical standards but risks remain around the management of ethical supply chains. In certain locations, where a limited number of suppliers meet these standards, additional strain is placed on the supply chain, thereby increasing the cost of supply and delivery times.

Furthermore, supply chains and rates can be impacted by natural disasters, such as earthquakes, extreme weather patterns and climate change, as well as other phenomena that include unrest, strikes, theft and fires. For example, a three-week transport strike in 2012 delayed the supply of consumables in South Africa. Although potential supply chain disruption in Mali, as a result of the coup d’état and the proliferation of armed combat in 2012 and 2013, were avoided by well managed consumable stock holding, ongoing instability and armed conflict in the country, even following the peace accord struck in 2015, could present material supply chain difficulties. Moreover, although potential gold doré export disruptions at Geita, which were the result of an attempted gold heist, and in Mali, following the closure of Bamako International Airport, were minimised with the introduction of alternative transportation arrangements, such alternatives may not be available upon the occurrence of similar or more severe situations in the future. In February 2013, a fire destroyed the heavy mining equipment stock of spares and components at the Geita gold mine. If AngloGold Ashanti experiences shortages, or increased lead times in the delivery of strategic spares, critical consumables, mining equipment or processing plant, the company might have to suspend some of its operations and its results of operations and financial condition could be adversely impacted.

The Siguiri mine was impacted as a result of the Ebola virus outbreak of 2014 in Western Africa, where certain crisis management measures were implemented. See “— AngloGold Ashanti’s Ore Reserve, deposits and mining operations are located in countries that face instability and security risks that may adversely affect both the terms of its mining concessions, as well as its ability to conduct operations in certain countries.” AngloGold Ashanti cannot guarantee that its crisis management measures will be adequate, that the supply chain and operations will not be adversely affected by a future Ebola or other epidemic outbreak and that there will be noknock-on effects such as severe food shortages and social impact. Epidemic-related export restrictions could similarly adversely impact the company’s financial condition and results of operations.

 

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Concerns about the integrity or reliability of the London Bullion Market Association (LBMA) Gold Price Benchmark could adversely affect investor interest in gold and confidence in the gold market.

Historically, the gold market relied on prices and trades made relative to a benchmark known as the London Gold Fix (Fix), set by a group of five fixing banks that matched buyers and sell orders. Following a series of allegations regarding the possible manipulation of the Fix by fixing banks, U.S., German and United Kingdom regulators undertook a review of the fixing process. While the U.S. Commodity Futures Trading Commission and the German BaFin dismissed allegations of manipulation in 2013 and 2015, respectively, in 2014 Deutsche Bank withdrew from the fixing panels and the UK Financial Conduct Authority (FCA) fined one of the fixing banks. The FCA identified systems and control failures and conflicts of interest in relation to gold fixing over the nine years to 2013 and one instance of gold price manipulation in 2012. Separately, several lawsuits have been filed against fixing banks alleging that they have colluded to manipulate the gold benchmark price, including class actions instituted in the United States in 2014 and Canada in 2015. Some of these class actions were settled in the United States in 2016.

In 2015, the London Gold Fix was replaced by the LBMA Gold Price Benchmark, which is run and managed by the Intercontinental Exchange (ICE). ICE is completely independent of the gold market as it does not conduct any trading of gold.

Whilst AngloGold had no role in the operation of the Fix during the period under review and has no responsibility for the conduct of the market makers in the gold market, the gold market could still be affected if the integrity of the Gold Price Benchmark is undermined as a result of ongoing lawsuits, resulting in reduced demand for the company’s gold, greater volatility in gold prices and less liquidity in the gold market. Furthermore, in 2015 AngloGold Ashanti joined the new oversight committee for the LBMA Gold Price Benchmark which is now regulated by the FCA. If further allegations are made against the Gold Price Benchmark in the future, AngloGold could be implicated more directly, which may have an adverse effect on its reputation.

Diversity in interpretation and application of accounting literature in the mining industry may impact reported financial results.

The mining industry has limited industry-specific accounting literature. As a result, there is diverse interpretation and application of accounting literature on mining-specific issues. AngloGold Ashanti, for example, capitalises drilling and costs related to defining and delineating a residual mineral deposit that has not been classified as a “Proven and Probable Ore Reserve” at a development project or production stage mine. Some companies may, however, expense such costs.

As and when this diverse interpretation and application is addressed, the company’s reported results could be adversely impacted should the adopted interpretation differ from the position it currently follows.

Failure to comply with laws, regulations, standards and contractual obligations, breaches in governance processes or fraud, bribery and corruption may lead to regulatory penalties, loss of licences or permits, negative effects on AngloGold Ashanti’s reported financial results, and adversely affect its reputation.

AngloGold Ashanti’s operations must comply with the United States Foreign Corrupt Practices Act and similar anti-corruption and anti-bribery laws of the jurisdictions in which AngloGold Ashanti operates. There has been a substantial increase in the global enforcement of these laws and an increased focus on the actions of mining companies. Although AngloGold Ashanti has a compliance programme in place designed to reduce the likelihood of violations of such laws, any violation could result in significant criminal or civil sanctions. Conversely, in certain circumstances, strict compliance with anti-bribery laws may conflict with certain local customs and practices. Since the company operates globally in multiple jurisdictions, including those with less developed political and regulatory environments, and within numerous and complex frameworks, its governance and compliance processes may not prevent potential breaches of law, accounting principles or other governance or customary practices.

AngloGold Ashanti’s Code of Business Principles and Ethics and Policy on Anti-Bribery and Anti-Corruption, amongst other policies, standards and guidance, and training thereon may not prevent instances of unethical or unlawful behaviour, including bribery or corruption. They also may not guarantee compliance with legal and regulatory requirements and may fail to enable management to detect breaches thereof.

Sanctions for failure by the company or others acting on its behalf to comply with these laws, regulations, standards and contractual obligations could include fines, penalties, imprisonment of officers, litigation, and loss of operating licences or permits, suspensions of operations and negative effects on AngloGold Ashanti’s reported financial results and may damage its reputation. Such sanctions could have a material adverse impact on the company’s financial condition and results of operations.

 

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Breaches in information technology security and violations of data protection laws may adversely impact AngloGold Ashanti’s business.

AngloGold Ashanti maintains global information technology and communication networks and applications to support its business activities.

The sophistication and magnitude of cybersecurity incidents are increasing and include malicious software, attempts to gain unauthorised access to data and other electronic security and protected information breaches that could lead to production downtimes, operational delays, the compromising of confidential or otherwise protected information, destruction or corruption of data, other manipulation or improper use of AngloGold Ashanti’s systems and networks or financial losses from remedial actions.

Information technology security processes may not prevent future malicious actions,denial-of-service attacks, or fraud, resulting in corruption of operating systems, theft of commercially sensitive data, misappropriation of funds and business and operational disruption. Material system breaches and failures could result in significant interruptions that could in turn affect AngloGold Ashanti’s operating results and reputation.

The interpretation and application of consumer and data protection laws in South Africa, the United States and elsewhere are uncertain and evolving. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with AngloGold Ashanti’s data practices. Complying with these various laws is difficult and could cause the company to incur substantial costs or require it to change its business practices in a manner adverse to its business.

Risks related to AngloGold Ashanti’s results of operations and financial condition as a result of factors specific to the company and its operations

AngloGold Ashanti’s Ore Reserve, deposits and mining operations are located in countries that face instability and security risks that may adversely affect both the terms of its mining concessions, as well as its ability to conduct operations in certain countries.

Some of AngloGold Ashanti’s mineral deposits and mining and exploration operations are located in countries that are experiencing political instability and economic and other uncertainty.

Certain of the countries in which AngloGold Ashanti has mineral deposits or mining or exploration operations, including the DRC, Mali, Guinea, Ghana, South Africa, Colombia and Brazil, have in the past experienced, and in certain cases continue to experience, a difficult security environment. In particular, various illegal groups active in regions in which the company is present may pose a credible threat of military repression, terrorism, civil unrest and disturbances, sabotage, extortion and kidnapping, which could have an adverse effect on its operations in these and other regions.

For example, Mali continues to experience a difficult security environment since the military coup in March 2012. The situation in Mali remains of heightened concern as a result of the instability in northern Mali, which also spread to Central Mali in 2016.

Eastern DRC also continues to experience tension consistent with the cycles of unrest experienced since the late 2000s. Fighting has caused instability in the area and could expand or intensify, particularly in response to certain political actions such as the postponement of elections in early 2017.

In 2012, AngloGold Ashanti Colombia’s (AGAC) assets and employees were the targets of direct attacks by hostile actors around the La Colosa project’s area of influence. Although a peace agreement was brokered in 2016, the risk of rogue factions joining criminal gangs remains a threat and other similar attacks could adversely affect the company’s activities in Colombia in the future.

In March 2017, the bullion strong room and security employees at Mineração Serra Grande in Brazil were the target of an armed attack. There were no fatalities or serious injuries, but the risk of a future attack remains a threat and other similar attacks could adversely affect the company’s activities in Brazil in the future.

From 2009 to 2015, the company recorded an almost four-fold increase in the instances of injury to security personnel, including members of AngloGold Ashanti’s internal security, private security companies and public security forces in certain jurisdictions. The injury rate increase was caused by a rise in the number and severity of security incidents resulting from increased illegal and artisanal mining due to a steady migration of people into the applicable areas and an increase in the level

 

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of organisation and funding of criminal activity around some of the company’s Continental African operations. Although this trend stabilised in 2016, intrusions onto the company’s tenement and operational areas, including illegal mining-related activities in particular, continue to be a challenge. The most significant security challenges remain in Tanzania, Guinea and Ghana, in areas where there is endemic poverty and high levels of unemployment. See “—Illegal and artisanal mining occurs on AngloGold Ashanti’s properties, which can disrupt the company’s business and expose the company to liability.” If the security environment surrounding the company’s operations that are most exposed to these challenges deteriorates, employee, third-party and community member injuries and fatalities could also increase. Any such increase could disrupt the company’s operations in certain mines and adversely affect its reputation, results of operations and financial condition.

In some instances, risk assessments categorise threats as serious enough to require resorting to public security forces, such as national police or military units on a near-permanent basis. For example, the company relies on the army for support at its mining operations in Ghana. Incursions occurred at the Obuasi mine following withdrawal of such state security protection in February 2016. In the event that continued operations in any of the company’s countries of operations compromise the company’s security or business principles, AngloGold Ashanti may withdraw from any such countries on a temporary or permanent basis. This could have a material adverse impact on AngloGold Ashanti’s results of operations and financial condition.

Furthermore, the company continues to experience strained relationships with certain of its host communities. AngloGold Ashanti operates in several regions where poverty, unemployment and the lack of access to alternative livelihoods mean that the creation and distribution of economic benefit from mining operations is a significant area of focus for community and government. For example, protests demanding employment by the communities and youth occurred at the company’s Siguiri mine in Guinea in 2016. AngloGold Ashanti has also been publicly accused of inadequate resettlement practices at its Siguiri operation by local and internationalnon-governmental organisations, which poses reputational risk. Additionally, AngloGold Ashanti has been involved in disputes with the Merafong City Local Municipality in South Africa over property valuations and water services surcharges. These matters have drawn public attention and have been discussed with the Minister of Mineral Resources.

In addition, infectious diseases are also a threat to the stability of some of the countries in which the company operates, where limited local health infrastructure weakens governments’ ability to manage and contain outbreaks effectively. For example, during August 2014, cases of Ebola virus disease (EVD) were reported in Siguiri, Guinea, which is located near AngloGold Ashanti’s Siguiri mine. EVD was also reported elsewhere in Guinea. The company implemented certain restrictions on travel to and from the Siguiri mine as a precaution. As EVD caused significant disruptions in the company’s exploration activities, particularly relating to field mapping and geophysics, AngloGold Ashanti also suspended its brownfields work programme and greenfields field work in the middle of 2014. Although this situation has normalised in Guinea, in the future the company may consider further safety measures which may negatively impact its operations or its exploration projects in neighbouring areas in countries that may be affected by infectious diseases.

AngloGold Ashanti’s mineral deposits, Ore Reserve, and mining operations are located in countries where political, tax and economic laws and policies may change rapidly and unpredictably and such changes and policies may adversely affect both the terms of its mining concessions, as well as its ability to conduct operations in certain countries.

Past experience demonstrates that political, tax and economic laws and policies in countries in which AngloGold Ashanti operates can change rapidly. Examples include the 2012 coup d’état and subsequent fighting in Mali, the foreign currency regulations that were imposed from 2011 to 2015 in Argentina and the ban on gold ore exports announced by the Tanzanian government in March 2017. As mining assets are fixed, the adverse impacts of such changes may be unavoidable and immediate.

Any existing and new mining, exploration operations and projects that the company carries out are subject to various national and local laws, policies and regulations governing the ownership, prospecting, development and mining of Ore Reserves, taxation and royalties, exchange controls, import and export duties and restrictions, investment approvals, employee and social community relations and other matters.

In many of the countries in which AngloGold Ashanti operates, there is an ongoing focus by governments seeking greater economic benefit and increased financial and social benefits from extractive industries and mining in particular. This entails the review of mining codes and stability agreements, which were in many cases designed under particular economic conditions, and the formulation or amendment of laws, policies and regulations relating to issues such as mineral rights and asset ownership, royalties, taxation and taxation disputes, “windfall” or “super” taxation,non-recovery of taxation refunds, import and export duties, currency transfers, restrictions on foreign currency holdings and repatriation of earnings. The laws, policies and

 

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regulations are increasingly uncertain, changing and generally require progressively higher payments to governments, notably in the form of increased royalties and taxes, mandated beneficiation, export levies and increasing or retaining state or national ownership of resources. In particular, changes to the fiscal terms governing AngloGold Ashanti’s operations may have a material adverse impact on the company’s results of operations or financial condition, threaten the viability of existing operations, and discourage future investments in certain jurisdictions. This may therefore have an adverse impact on the company’s ability to access new assets and potentially reduce future growth opportunities.

For example, on 9 September 2011, a new mining code for Guinea was enacted. The new mining code significantly increased the share of state ownership in the mining industry, extending a 15 percent share of future mining projects to the government, without financial compensation. The government also had the option to purchase up to an additional 20 percent of each project. However, the new mining code was suspended in October 2012 due to unfavourable reception. On 8 April 2013, the Guinean parliament voted to amend the 2011 Mining Code. The amendment was promulgated shortly thereafter by Presidential Decree on 17 April 2013. The new legislation provided that existing mining conventions would be amended through addenda which would contain various provisions, including provisions relating to taxation, state equity participation in mining companies and other matters. AngloGold Ashanti’s new convention came into effect in January 2017 and includes, among other terms, a five percent royalty on gold and a 15 percent free-carried,non-contributory interest in the mine for the Republic of Guinea. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine”. Any future amendments to the mining code or attempts to renegotiate the convention could have further adverse effects on the company’s financial condition and profitability.

In 2012, the government of Ghana amended its fiscal mining regime, increasing its corporate taxation to 35 percent and royalty rates of five percent. Furthermore, the government of Ghana has constituted a review committee to review andre-negotiate stability agreements with mining companies. AngloGold Ashanti is waiting to be invited to participate in negotiations with the Ghanaian review committee. The outcome of these negotiations may have a material adverse effect on the company’s results of operations or financial condition.

AngloGold Ashanti and other major mining companies are in talks with the Tanzanian government regarding new mining legislation and its impact on existing mining agreements. Such talks follow an earlier declaration in July 2012 by the Tanzanian Minister of Energy and Minerals that the mining contracts were under review. The new mining legislation and the outcome of the review of the mining contracts may have a material adverse impact on the company’s results of operations and financial condition. In 2012, the Tanzanian Minister of Energy and Minerals increased the royalty rate levied on gold extracted in Tanzania by AngloGold Ashanti’s operations by one percent, which had a direct impact on the revenues earned from the operations in Tanzania. This change was ratified on 9 October 2014, together with the cancellation of a capital allowance previously applicable to unredeemed qualifying capital expenditure and a new levy payable to the Geita District Council. In 2015, a 30 percent capital gains tax on sales of shares and a new act cancelling VAT exemptions on company purchases came into force. Then, in 2016, Tanzanian regulations came into effect mandating the sale of shares in Tanzanian operations to nationals by way of a public offering and listing on the Dar es Salaam Stock Exchange that may apply to companies that carry out large scale mining operations. The company believes that the listing requirement conflicts with the development agreements, and has initiated discussions with the government of Tanzania to be exempted from the listing requirements. However, the company can provide no assurance that the listing requirement will not apply to AngloGold Ashanti, and if this new requirement and the other new laws identified above are applied to the company, there may be an adverse impact on the company’s results of operations in Tanzania.

On 1 July 2012, Australia’s Minerals Resource Rent Tax (MRRT) came into effect after the legislation was passed in March 2012. The MRRT, which was repealed in 2014, applied only to the bulk commodities of coal and iron ore, and replaced the previously proposed Resource Super Profits Tax (RSPT), which covered all minerals. The Australian federal government did not include gold and uranium in the final MRRT. However, should Australia consider reintroducing the RSPT, or if similar “super profit” taxes were to be introduced and implemented in any other country in which AngloGold Ashanti operates, the company’s results of operations and financial condition could be materially adversely affected.

In addition, some of AngloGold Ashanti’s mineral deposits and mining and exploration operations are located in countries that are experiencing social and political instability as well as economic uncertainty. In these countries, there is a risk that political influence may delay or hinder strategic imperatives for cost rationalisation especially in the areas of procurement and labour reductions. For example, in South Africa, country risk has increased in light of the violent strike action, social unrest and protest. In addition, allegations of corruption in Brazil and Guinea against top political and industry leaders have increased political instability and distrust, and efforts at political and economic reform in Brazil may lead to increased instability. Additionally, the political rhetoric and incentives prior to national elections in Ghana late in 2016 may have influenced and slowed the national response to the illegal mining at Obuasi. The high levels of unemployment, poverty and inequality remain in each of these countries, further increasing the risk of social instability that will continue to negatively impact their economies, business and the mining industry.    

 

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The MPRDA Amendment Bill of 2013, passed by the National Assembly of Parliament of the Republic of South Africa on 12 March 2014 (and referred back to the National Assembly by the President on 16 January 2015), could, if ruled to be constitutional, impact AngloGold Ashanti’s business by empowering the Minister of Mineral Resources to set developmental pricing conditions for certain minerals for beneficiation purposes, impose export permits on designated minerals and give the State an open-ended free carried interest and State participation.

In June 2013, the Brazilian government proposed changes to the mining legislation that are still being discussed in congress. The proposals could make the rules governing access to mining titles more discretionary and could shorten the duration of exploitation rights. Following the November 2015 tailings dam collapse in Minas Gerais on the mining properties of companies not affiliated with AngloGold Ashanti, the Brazilian government has also considered including tougher requirements related to tailings dams (e.g., mandatory insurance in case of environmental catastrophe).

Mining is a long-term activity and assets may be located in jurisdictions with elevated risk. Political instability and the resulting unstable business environment in such countries in which companies operate may discourage future investment in those jurisdictions, and may have an adverse impact on the company’s ability to access new assets, potentially reducing growth opportunities.

AngloGold Ashanti is subject to an uncertain tax environment. Increased taxes are expected in most countries of operation. Changes in tax laws could result in higher tax expense and payments. Furthermore, legislation changes could materially impact AngloGold Ashanti’s tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities. In addition, the uncertain tax environment in some regions could limit AngloGold Ashanti’s ability to enforce its rights. As a global company, AngloGold Ashanti conducts its business in countries subject to complex tax rules, which may be interpreted in different ways. Further interpretations or developments of tax regimes may affect the company’s tax liability, return on investments and business operations. AngloGold Ashanti is regularly examined by tax authorities in its various jurisdictions of operation

In Guinea, Mali, DRC and Tanzania, AngloGold Ashanti is due refunds of input tax and fuel duties which have remained outstanding for periods longer than those provided for in the respective statutes. For example, AngloGold Ashanti calculates that overdue recoverable value added tax, fuel duties and appeal deposits of $57 million are owed to AngloGold Ashanti and held by the Tanzanian government and it is not certain when, if ever, AngloGold Ashanti will be refunded this amount. Similarly, it is not certain when or whether AngloGold Ashanti will be refunded all amounts due from any other government.

The countries in which the company operates may also introduce export restrictions, strict exchange controls, impose restrictions to source materials and services locally, or impose other similar restrictions that hinder foreign companies’ operations within such countries. For example, in March 2017, the Tanzanian government announced an immediate ban on gold, silver, copper and nickel ore exports, in an attempt to ensure that mineral value-addition activities would be carried outin-country. This regulatory change does not currently impact the Geita mine or Tanzanian operations as the company does not export unrefined or refractory ore out of Tanzania. Additionally, from 2011 to 2015, the Argentinian government introduced stricter exchange controls and related protracted approval processes which limited the company’s ability to repatriate dividends from its Argentinian subsidiaries. In October 2011, the Argentinian government decreed that mining, oil and energy companies must repatriate export earnings and additionally, the purchase of U.S. dollars required authorisation from the Argentinian central bank and the purpose for which the currency would be used had to be stated. In May 2012, the Argentine Mining Secretariat issued new regulations requiring mining companies in Argentina to boost their domestic purchases of equipment and services and mining companies were required to resort exclusively to locally established suppliers for their export-related shipping and logistics operations. While the new government, elected in November 2015, started a process to ease these controls and return to an open economy and free market, not all restrictions had been lifted as of March 2017.

If, in one or more of the countries in which it operates, AngloGold Ashanti were not able to obtain or maintain necessary permits, authorisations or agreements to implement planned projects or continue its operations under conditions or within timeframes that make such plans and operations economically viable, or if the applicable legal, ownership, fiscal (including all royalties and duties), exchange control, employment, environmental and social laws or regimes change materially, or if the governing political authorities change resulting in amendments to such laws and regimes, this could have a material adverse effect on AngloGold Ashanti’s operating results, financial condition, and, in extreme situations, on the viability of an operation. The risk is particularly acute in South Africa. See “—AngloGold Ashanti’s mining rights in the countries in which it operates could be altered, suspended or cancelled for a variety of reasons, including breaches in its obligations in respect of such mining rights” and “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine”.

 

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AngloGold Ashanti’s mining rights in the countries in which it operates could be altered, suspended or cancelled for a variety of reasons, including breaches in its obligations in respect of such mining rights.

AngloGold Ashanti’s right to own and exploit Ore Reserves and deposits is governed by the laws and regulations of the jurisdictions in which the mineral properties are located. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine”. Currently, a significant portion of the company’s Ore Reserves and deposits are located in countries where mining rights could be suspended or cancelled should it breach its obligations in respect of the acquisition and exploitation of these rights.

In each of the countries in which AngloGold Ashanti operates, the formulation or implementation of government policies on certain issues may be unpredictable. This may include changes in laws relating to mineral rights and ownership of mining assets and the right to prospect and mine, and in extreme cases, nationalisation, expropriation or nullification of existing concessions, licenses, permits, agreements and contracts.

Any existing and new mining and exploration operations and projects are subject to various national and local laws, policies and regulations governing the ownership and the right to prospect or mine or develop proposed projects. For more details on the risks surrounding ownership of mining assets, see “— Title to AngloGold Ashanti’s properties may be uncertain and subject to challenge” and “— AngloGold Ashanti’s Mineral Reserve, deposits and mining operations are located in countries that face political, economic and security risks that may affect both the terms of its mining concessions, as well as its ability to conduct operations in certain countries”.

Project implementation delays could result in licences not being renewed and the loss of mining rights. Some of AngloGold Ashanti’s mining concessions, authorisations, licences and permits are subject to expiry, limitations on renewal and various other risks and uncertainties. For example, in 2012 the DRC Mines Minister announced a reform of the DRC’s mining code that could have had a material adverse impact on the protections enjoyed by AngloGold Ashanti’s projects in the DRC. While the reform plans were postponed in February 2016, there can be no assurance that the DRC Mines Minister will not undertake similar reforms in the future.

In addition, any dispute with governments or other stakeholders, including labour unions, involving an AngloGold Ashanti operation, as a result of rationalisation efforts or otherwise, could negatively affect AngloGold Ashanti’s relationship with such government or stakeholders in respect of other operations within the same country, which could result in adverse consequences, including unfavourable regulatory action, claims and labour disputes. Such adverse consequences could be exacerbated due to the holding company structure of AngloGold Ashanti’s subsidiaries in some of the countries in which it operates.

Moreover, in South Africa, AngloGold Ashanti’s mining rights may be suspended or cancelled by the Minister of Mineral Resources, and the company may be unable to obtain new mining rights if it breaches its obligations under the Mineral and Petroleum Resources Development Act (MPRDA). In particular, South Africa’s changing Black Economic Empowerment (BEE) policies may adversely affect both the terms of AngloGold Ashanti’s mining concessions, as well as its ability to conduct operations. Mining rights are linked to compliance with various obligations, including the Revised Mining Charter. Compliance with the Revised Mining Charter is measured using a designated scorecard relating to equity ownership and management control of mining companies by historically disadvantaged South Africans (HDSAs). The deadline for compliance was originally set for the end of 2014, at which time HDSAs had to constitute 40 percent of all levels of management.

Whilst AngloGold Ashanti believes that it complied with ownership targets that had to be achieved by the end of 2014, it has not yet received its scorecard from the government assessing its compliance with applicable requirements and it may need to make further progress to achieve future targets, including further participation by HDSAs in senior and top management levels, the upgrade of housing and accommodation at the company’s mines, further human resource development, mine community development, sustainable development and growth as well as procurement and enterprise development.

The company will incur expenses in giving further effect to the Revised Mining Charter and the scorecard. AngloGold Ashanti may not meet all of the various requirements by the required dates. Additionally, the South African government may decide that the Revised Mining Charter has not gone far enough to achieve its underlying goals and therefore decide to expand the obligations of mining companies thereunder and the Minister of Mineral Resources may opt to disregard certain historical BEE transactions in connection with its review of new mining rights applications.

In March 2015, the Minister of Mineral Resources announced that the Department of Mineral Resources (DMR) and the Chamber of Mines of South Africa had jointly agreed to submit certain matters relating to the interpretation of the Revised Mining Charter, including the qualification of certain historical BEE transactions for meeting the HDSA ownership thresholds, to the courts in South Africa for determination and clarification. On 9 March 2016, AngloGold Ashanti received a notice from the DMR stating that the company was not compliant with the 26 percent HDSA ownership requirement. AngloGold Ashanti timely

 

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responded to the order and as the DMR has taken no further action, its original notice has lapsed. However, in April 2016, the DMR published a new draft mining charter (Draft 2016 Mining Charter) which would, amongst other aspects, require mining companies to retain the minimum target of 26 percent HDSA ownership threshold per mining right for as long as they hold the right, even if the original HDSA participants sell out, and would require mining companies to achieve a minimum representation of Black People in certain management and skilled positions. The Minister of Mineral Resources has indicated that it is the DMR’s intention to publish a final version of the Draft 2016 Mining Charter in March 2017 based on the DMR’s engagement with stakeholders in the industry and without a further formal public participation process. See “Item 4B: Business Overview – The Regulatory Environment Enabling AngloGold Ashanti to Mine”. Should AngloGold Ashanti be found in breach its obligations to comply with the MPRDA, Revised Mining Charter or any future amendments to the Revised Mining Charter, it may be compelled to conduct additional BEE transactions or its mining rights in South Africa could be suspended or cancelled by the Minister of Mineral Resources and it may be unable to obtain any new mining rights. Any such suspension or cancellation could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.

In addition, and as discussed in more detail in “Item 4B: Business Overview – The Regulatory Environment Enabling AngloGold Ashanti to Mine”, South Africa recently enacted the BBBEE Amendment Act, which amended the Broad-based Black Economic Empowerment Act 53 of 2003. There are several areas of potential conflict between the BBBEE Amendment Act and the Revised Mining Charter. The BBBEE Amendment Act became effective on 24 October 2016 and is understood to override any conflicting law, including the Revised Mining Charter. Although the Draft 2016 Mining Charter seeks to align the Revised Mining Charter with the BBBEE Amendment Act, similar regulatory conflicts and uncertainty may continue to prevail in the future.

In Colombia, a government agency grants exclusive concession contracts for exploration and exploitation. With the award of the mining concession or tenement contract, there are specified timelines for the completion of the various phases of a mining project, e.g. exploration, construction, exploitation. The company must comply with these timelines unless performance is excused, for example, due to force majeure or if extensions or modifications to the timelines are received. If the company does not comply with the specified timelines for the completion of the various phases of a mining project, the mining authority may revoke the company’s concession contracts or mining licenses. The company’s core mining concession contracts provide that the mining authority has the discretion to declare the underlying concession void AGAC breaches applicable environmental laws or regulations. If the mining authority were to exercise such discretion against AGAC, AGAC would be required to abandon its projects and all of its other existing mining concession contracts. Pending proposals for new mining concession contracts would also be cancelled and AGAC would be banned from doing business with the Colombian government for a period of five years.

AGAC has applied for consolidation of its tenement contracts related to La Colosa, some of which are currently not in compliance with their specified timelines. The company is waiting for approval of its application for consolidation, which would remedy thenon-compliance of each consolidated tenement, but can provide no assurance that its application will be approved.

AngloGold Ashanti’s insurance does not cover most losses caused by the risks described above; see “— The occurrence of events for which AngloGold Ashanti is not insured or for which its insurance is inadequate may adversely affect cash flows and overall profitability”.

If AngloGold Ashanti is not able to obtain or maintain necessary permits, authorisations or agreements to prospect or mine or to implement planned projects, or continue its operations, or comply with all laws, regulations or requirements, or do so within timeframes that make such plans and operations economically viable, or if the laws impacting the company’s ownership of its mineral rights or the right to prospect or mine change materially, or should governments increase their ownership in the mines or nationalise them, AngloGold Ashanti’s results of operations and financial condition could be adversely affected.

Title to AngloGold Ashanti’s properties may be uncertain and subject to challenge.

AngloGold Ashanti has operations in several countries where ownership of land is uncertain and where disputes may arise in relation to ownership. Certain of the company’s properties may be subject to the rights or the asserted rights of various community stakeholders, including indigenous people. The presence of those stakeholders may have an impact on AngloGold Ashanti’s ability to develop or operate its mining interests. For example, in Australia, the Native Title Act (1993) provides for the establishment and recognition of native title under certain circumstances. In South Africa, the Extension of Security of Tenure Act (1997) and the Restitution of Land Rights Act (1994) provide for various landholding rights. Such legislation is complex, difficult to predict and outside of the company’s control, and could therefore negatively affect the business results of

 

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new or existing projects. In Ghana in February 2012, the company negotiated the relocation of the Sansu Community, which lies within its local mining concession; the cost of this relocation was approximately $30 million. Where consultation with stakeholders is statutorily or otherwise mandated, relations may not remain amicable and disputes may lead to reduced access to properties or delays in operations.

Title to the company’s properties, particularly undeveloped ones, may also be defective or subject to challenge. Title insurance generally is not available, and title review does not necessarily preclude third parties from contesting ownership. Where surveys have not been conducted, the precise area and location of the company’s claims may be in doubt and concessions granted under various titles in a single area may turn out not to be perfectly contiguous, leaving title to areas between concessions open to challenge. Accordingly, AngloGold Ashanti’s mineral properties may be subject to prior unregistered liens, agreements, transfers or claims, including native land claims, and title may be affected by, amongst other things, undetected defects.

AngloGold Ashanti may experience unforeseen difficulties, delays or costs in successfully implementing its business strategy and projects, including any cost-cutting initiatives, temporary or permanent shutdowns, divestments and other portfolio rationalisation initiatives and any such strategy or project may not result in the anticipated benefits.

The successful implementation of the company’s business strategy and projects depends upon many factors, including those outside its control. For example, the successful management of costs will depend on prevailing market prices for input costs. The ability to grow the business will depend on the successful implementation of the company’s existing and proposed project development initiatives and continued exploration success, as well as on the availability of attractive merger and acquisition opportunities, all of which are subject to the relevant mining and company specific risks as outlined in these risk factors.

Since 2013, AngloGold Ashanti has implemented initiatives relating to strategic alignment, portfolio review, restructuring and cost-cutting, temporary or permanent shutdowns, and divestments, including in connection with the consolidation of its business activities and assets. Any future contribution of these measures to profitability will be influenced by the actual savings achieved and by the company’s ability to sustain these ongoing efforts. Strategic alignment, restructuring and cost-cutting initiatives may involve various risks, including, for example, labour unrest, operating licence withdrawal, and potentialknock-on effects to other company projects and jurisdictions. The risk is elevated in South Africa, given calls for withdrawal of mining licences for “mothballed shafts” and hostile reaction to proposed mining industry retrenchments.

The risk is also significant in Ghana, where the restructuring and repositioning of the Obuasi mine have resulted in halting of the mine’s existing operations and significant workforce redundancies. In 2014 alone, these redundancies resulted in the company incurring $210 million in retrenchment costs. Furthermore, three months after entering into a conditional investment agreement with AngloGold Ashanti in 2015 for the purpose of redeveloping and operating the Obuasi mine, Randgold Resources Limited (Randgold) informed AngloGold Ashanti that it wished to terminate the agreement, as the proposed investment did not meet Randgold’s investment criteria.

If AngloGold Ashanti fails to demonstrate or realise its business case for the redevelopment of the Obuasi operation, including because the company is unable to finalise a joint venture or other agreement with a partner to make the substantial investments necessary for redevelopment, to obtain the required consents, approvals or agreements for continued operation or to continue to stabilise security conditions following the withdrawal of state security protection in early 2016, AngloGold Ashanti may be forced to withdraw from the Obuasi mine on a long-term or permanent basis.

Finally, the risk may also be high in the DRC, in light of the government’s expressed intention to reform the mining code. See “—AngloGold Ashanti’s mining rights in the countries in which it operates could be altered, suspended or cancelled for a variety of reasons, including breaches in its obligations in respect of such mining rights”.

In addition, these measures may not be implemented as planned, turn out to be less effective than anticipated, only become effective later than anticipated or not be effective at all. Any of these outcomes, individually or in combination, may adversely impact the company’s business, results of operations and financial condition.

Expectations for and trends in the price of gold, combined with increased costs for project financing and exploration in certain regions, have led AngloGold Ashanti to increase its efforts to focus capital expenditure on its highest quality assets, whilst freeing up capital by curtailing capital expenditure or suspending operations at those projects that the company believes are of lower quality. AngloGold Ashanti may also consider finding partners or conducting asset sales relating to certain of its projects. With respect to dispositions, the company may not be able to obtain prices that it expects for the assets it seeks to dispose of or divest some of its activities as planned or to obtain all of the required approvals, and the divestitures that are carried out could have a negative impact on AngloGold Ashanti’s business, results of operations, financial condition and reputation, including as a result of subsequent claims brought by acquirers in connection with divested assets.

 

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AngloGold Ashanti may also prove unable to deliver on production targets, including in potentially critical areas as well as on the timely, cost-effective and successful execution, includingramping-up, of key capital projects. For example, in South Africa, the company experienced declining production rates (967,000 ounces in 2016, compared with 1.00 million ounces of gold in 2015, 1.22 million ounces of gold in 2014, and 1.30 million ounces in 2013), principally due to continued safety and associated stoppages, mining flexibility constraints and overall falls in grades. Management estimates that stoppages in 2016 resulted in production loss of 104,000 ounces. In addition, Colombia is an untested jurisdiction, so permitting, licensing, stakeholder expectations and demands and other external factors could affect timelines and cause capital overruns. Unforeseen difficulties, delays or costs may adversely affect the successful implementation of the company’s business strategy and projects, and such strategy and projects may not result in the anticipated benefits, which could have a material adverse effect on its financial results and prospects.

Labour unrest, activism and disruptions (including protracted stoppages) could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.

AngloGold Ashanti’s employees in South Africa, Ghana, Guinea, Mali, Brazil and Argentina are highly unionised and unions are active at some of its other operations. Trade unions, therefore, have a significant impact on the general labour relations environment, including labour relations at an operational level. The extent of the unions’ influence also impacts the socio-economic and socio-political operating environments, most notably in South Africa. Union involvement in wage negotiations and collective bargaining increases the risk of strike action. In South Africa, the emergence of the Association of Mining Construction Union (AMCU) challenging the dominance of the longstanding National Union of Mineworkers (NUM) lends itself to conflict, inter union rivalry and a risk of labour relations instability. Management expects that unions will continue to use their collective power and ability to withhold labour to advocate for improved conditions of employment, labour regulatory change, political and social goals in the future.

Under the prevailing unstable global economic climate in particular, unions could utilise disruptions, strikes and protest action to oppose restructuring and downscaling of the mining industry. In South Africa, a variety of legacy issues such as housing, migrant labour, education, poor service delivery and youth unemployment can lead to communities and unions working together to create instability in and around mining operations. As such, there is a risk to the safety of people and damage to company infrastructure and property.

The contagion effect of a wave of unprotected strike action and labour unrest which occurred in South Africa and particularly in the mining sector during 2012 led to asix-week unprotected strike at all of AngloGold Ashanti’s South African operations in September of that year. The strike action was fuelled by several issues, including the emergence of AMCU, expectations of higher wage increases, and general social and economic conditions. Similar disruptions in the future may have a material adverse effect on the company’s results of operations and financial condition.

In South Africa, a three-year wage agreement was reached in 2015 with unions representing the majority of the company’s employees. This agreement was extended to all employees irrespective of their union affiliation. However, AMCU did not sign the agreement and challenged the extension of the agreement’s terms to its members. The success of challenges like these could have an adverse impact on the company’s financial condition as a result of increases in labour costs. See “—Increased labour costs could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition”.

In South Africa, the broader labour relations climate remains fragile. Unresolved issues emanating from the 2015 wage review could result in strike action. In addition, wage negotiations in other mining sectors may influence the stance unions adopt leading up to the 2018 gold negotiations. The labour relations climate is further exacerbated by a number of other issues such as (i) pressure building amongst all unions and employees regarding legislation reform affecting pensions and provident funds; (ii) demonstrations by the citizenry and students about public services and free education; (iii) public outcry relating to racism; and (iv) the effect of confrontations between political parties in thelead-up to elections, all of which may have repercussions in the workplace.

In South Africa, companies’ ability to undertake a restructuring of mining operations that could result in layoffs or redundancies is curtailed by governmental intervention. Going forward, management expects that the Department of Minerals and Energy will invoke its powers to intervene in any such restructuring process and will be able to place external pressure on mining companies due to its control over the renewal and cancellation of mining rights.

In West Africa, union negotiations are increasingly impacted by a focus on broader social grievances. In Mali and Guinea,pro-labour andpro-union practices supported by government labour authorities may result in increased labour union activity and the breach of obligations contained in agreements with labour unions.

 

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Any future labour unrest and disruptions could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.

Increased labour costs could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.

Labour costs represent a substantial proportion of the company’s total operating costs and at many operations in South Africa and the Americas, constitute approximately 40 to 50 percent of the operations’ operating costs. Absent any simultaneous increase in productivity, any change to the company’s wage agreements or other factors that could increase labour costs may have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.

During 2016, approximately 65 percent of the company’s workforce, excluding contractors, was located in South Africa. In South Africa, the historical practice has been to negotiate wages and conditions of employment with the unions every two years through the Chamber of Mines of South Africa. However, the 2015 wage agreement was negotiated to cover a period of three years. Nevertheless, AMCU, which did not sign the agreement, continued its efforts to challenge the extension of the wage agreement to its members, although its legal challenge was ultimately unsuccessful. Separately, in 2015 the Labour Court found in favour of AMCU regarding the dismissal of 542 employees at Moab Khotsong in April 2013. The relevant employees werere-instated and AngloGold Ashanti paid each employee an amount equivalent to 12 months’ basic pay, which had an adverse impact on the company’s financial condition. As a result of AMCU’s challenges, the risk of potential strike action remains high and further adverse findings could increase labour costs of the company, which could have a material adverse impact on its financial condition.

AngloGold Ashanti’s results may be further impaired if the company incurs penalties for failing to meet standards set by labour laws regarding workers’ rights or incurs costs complying with new labour laws, rules and regulations. For example, employment law in South Africa imposes monetary penalties for neglecting to report to government authorities on progress made towards achieving employment equity in the workplace. Ghanaian law also contains broad provisions requiring mining companies to recruit and train Ghanaian personnel and to use the services of Ghanaian companies. In Australia, the federal government put in place an industrial relations system that includes “good faith bargaining” obligations for employers, fewer restrictions on the content of collective agreements and an enhanced role for union officials as bargaining representatives, parties to agreements and participants in dispute resolution. Penalties and compliance costs, as well as increased costs due to laws and regulations less favourable to employers, could have a material adverse effect on the company’s results of operations and financial condition.

Illegal and artisanal mining occurs on AngloGold Ashanti’s properties, which can disrupt the company’s business and expose the company to liability.

Illegal and artisanal miners are active on, or adjacent to at least 15 of AngloGold Ashanti’s properties, which leads at times to interference with the company’s operations and results in conflict situations that present a security threat to property and human life. Illegal artisanal and small-scale mining is associated with a number of negative impacts, including environmental degradation, flouting of land rights, poor working practices, erosion of civil society, human rights abuse and funding of conflict. The environmental, social, safety and health impacts of artisanal mining are frequently attributed to formal mining activity, and it is often assumed that artisanally-mined gold is channelled through large-scale mining operators, even though artisanal and large-scale miners have distinct supply chains. These misconceptions impact negatively on the reputation of the industry.

The activities of the illegal miners, which include theft and shrinkage, could cause damage to AngloGold Ashanti’s properties, including pollution, underground fires, or personal injury or death, for which AngloGold Ashanti could potentially be held responsible. Illegal mining could result in the depletion of mineral deposits, potentially making the future mining of such deposits uneconomic. The presence of illegal miners could lead to project delays and disputes regarding the development or operation of commercial gold deposits. Furthermore, in 2011 and 2012, the company recorded an increase in the number and severity of security incidents, due to a steady migration of people into the areas and an increase in the level of organisation and funding of criminal activity around some of the company’s Continental African operations, likely encouraged by an escalating gold price at that time. The most significant security challenges have occurred in Tanzania and Ghana in areas where there is endemic poverty and high levels of unemployment. For example, in February 2016, AngloGold Ashanti withdrew its employees performingnon-essential functions from its idled Obuasi gold mine following the incursion of illegal miners inside the fenced areas of the site. An AngloGold Ashanti employee was killed in the incursions. More generally, illegal mining and theft could also result in lost gold Ore Reserves, mine stoppages, and have other material adverse effects on AngloGold Ashanti’s results of operations or financial condition.

 

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AngloGold Ashanti competes with mining and other companies for key human resources with critical skills and its inability to retain key personnel could have an adverse effect on its business.

AngloGold Ashanti competes on a global basis with mining and other companies to attract and retain key human resources at all levels with the appropriate technical skills and operating and managerial experience necessary to operate and supervise its business. This is exacerbated by the global shortage of persons with critical mining skills, including geologists, mining engineers, metallurgists and skilled artisans. Furthermore, the often remote locations of mining operations may make the mining industry unattractive to potential employees. Changes in taxation and the regulatory environment where AngloGold Ashanti operates may also impact the company’s ability to attract and retain key personnel, especially those from abroad.

The retention of staff is particularly challenging in South Africa, where, in addition to the impacts of global industry shortages of skilled labour, AngloGold Ashanti is required to achieve employment equity targets of participation by HDSAs in management and other positions. AngloGold Ashanti competes with all companies in South Africa to attract and retain a small but growing pool of HDSAs with the necessary skills and experience. AngloGold Ashanti has historically faced difficulty recruiting and retaining young graduates and qualifiedmid-level management in South Africa and may encounter greater difficulties in the future as the government attempts to impose increasingly stringent HDSA participation requirements. See “—AngloGold Ashanti’s mining rights in the countries in which it operates could be altered, suspended or cancelled for a variety of reasons, including breaches in its obligations in respect of such mining rights” and “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine”. Recruitment of skilled personnel has also been challenging in Continental Africa due to university offerings that are often not well-suited to the specific needs of the mining industry, as well as other factors such as language barriers and low literacy skills.

The recruitment of skilled workers is also highly competitive in South America as a result of a shortage of skills and intense competition between mining companies.

Additionally, the company may incur significant costs to build talent, capacity and expertise across its global operations. Despite AngloGold Ashanti’s investments, the company may not be able to retain and attract sufficient skilled and experienced employees in all areas of the business. Should it fail to do so or lose any of its key personnel with critical skills, business and growth prospects may be harmed and this could have an adverse impact on AngloGold Ashanti’s results of operations and financial condition.

AngloGold Ashanti’s inability to retain its senior management may have an adverse effect on its business.

The company’s success depends largely upon the continued service of its senior management, including its chief executive officer, chief financial officer, the executive officers at each of its business divisions and general managers at its mines.

The loss of one or more members of the senior management teams, coupled with the reduced attractiveness of the gold mining sector, could lead to other members of the management team leaving, disrupt the company’s operations, and have a material adverse impact on the company’s business, results of operations and financial condition.

The use of contractors at certain of the company’s operations may expose AngloGold Ashanti to delays or suspensions in mining activities and increases in mining costs.

AngloGold Ashanti uses contractors at certain of its operations to mine and deliver ore to processing plants as well as for other purposes. At mines employing mining contractors, contracting costs represent a significant proportion of the total operating costs of these operations and the company does not own all of the mining equipment. For example, increased contractor rates at the Sadiola mine in Mali contributed to a significant rise in total cash costs in the final quarter of 2011. Increased contractor costs at Sunrise Dam in Australia and Geita in Tanzania contributed to higher cash costs in the first quarter of 2012.

AngloGold Ashanti’s operations could be disrupted, resulting in additional costs and liabilities, if the mining contractors at affected mines have financial difficulties, or if a dispute arises in renegotiating a contract, or if there is a delay in replacing an existing contractor and its operating equipment to meet business needs at expected cost levels. Increases in contract mining rates, in the absence of associated productivity increases, will also have an adverse impact on the company’s results of operations and financial condition. For example, on 13 October 2012, AngloGold Ashanti terminated the underground development contract with a third-party contractor at the Obuasi mine in Ghana. The costs of the termination amounted to $17 million. On 10 February 2014 workers employed by a contractor at Sadiola and Yatela went on afive-day strike demanding improved redundancy payments. See “—Labour unrest, activism and disruptions could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition”. Furthermore disagreements over costs with contractors at Siguiri in Guinea and Iduapriem in Ghana resulted in a dispute in 2015.

Contractor disputes can also arise after the termination of the contractual relationship or the sale of the applicable mine. For example, the company is currently involved in arbitration proceedings with contractors in Ghana with regard to its Obuasi mine and in the United States with regard to its former Cripple Creek & Victor mine. See “Item 8A: Legal Proceedings”

 

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In addition, AngloGold Ashanti’s reduced control over those aspects of operations which are the responsibility of contractors, their failure to comply with applicable legal, human rights and regulatory requirements, or their inability to manage their workforce or provide high quality services or a high level of productivity could adversely affect AngloGold Ashanti’s reputation, results of operations and financial condition, and may result in the company’s incurrence of liability to third parties due to the actions of contractors.

The level of AngloGold Ashanti’s indebtedness could adversely impact its business.

As at 31 December 2016, AngloGold Ashanti had gross borrowings of $2.178 billion (2015: $2.737 billion), excluding all finance leases and fair value adjustments on bonds.

AngloGold Ashanti’s indebtedness could have a material adverse effect on its flexibility to conduct business. For example, the company may be required to use a large portion of its cash flow to pay the principal and interest on its debt, which will reduce funds available to finance existing operations and the development of new organic growth opportunities and further acquisitions. In addition, under the terms of the company’s borrowing facilities from its banks, AngloGold Ashanti is obliged to meet certain financial and other covenants. AngloGold Ashanti’s ability to continue to meet these covenants and to service its debt will depend on its future financial performance, which will be affected by its operating performance as well as by financial and other factors, including in particular the gold price, certain of which are beyond its control.

Should the cash flow from operations be insufficient, AngloGold Ashanti could breach its financial and other covenants. Covenant breaches, if interpreted as events of default under one or more debt agreements, could allow lenders to accelerate payment of such debt. Any such acceleration could result in the acceleration of indebtedness under other financial instruments. As a result, the company may be required to refinance all or part of the existing debt, use existing cash balances, issue additional equity or sell assets. However, the company may be unable to sell assets on reasonable or profitable terms as and when necessary. Additionally, AngloGold Ashanti cannot be sure that it will be able to refinance its debt on commercially reasonable terms, if at all. The company’s ability to access the bank, public debt or equity capital markets on an efficient basis may be constrained by dislocation in the credit markets or capital and liquidity constraints in the banking, debt or equity markets at the time of issuance.

Any downgrade of credit ratings assigned to AngloGold Ashanti’s debt securities could increase future interest costs and adversely affect the availability of new financing.

An actual, anticipated or unexpected negative development of AngloGold Ashanti’s results of operations or cash flows, country risk, financial metrics, or an increase in net debt position could result in a deterioration of the company’s credit ratings. AngloGold Ashanti’s ratings are influenced inter alia, by the location of its domicile and its operations.

On 22 January 2016, a rating agency placed the ratings of 55 mining companies globally, including AngloGold Ashanti’s, on review for downgrade. This action reflects the agency’s global effort to recalibrate its ratings in the mining sector to align with the continued downside volatility observed in global commodities. The review will consider each mining company’s asset base, cost structure, cash flows and liquidity, as well as management’s strategy for coping with downside price volatility and the ability to execute on the same. While the rating agency affirmed the rating for the company in March 2016 and updated its outlook from negative to stable, there is no assurance that this or other rating agencies will not conduct similar reviews in the future or that the company will not be downgraded as a result of such further assessments.

A second rating agency downgraded South Africa’s long-term foreign and local currency rating to‘BBB-’ from ‘BBB’ and to ‘BBB’ from ‘BBB+’, respectively on 4 December 2015. Furthermore, the first agency’s government issuer rating for South Africa was affirmed but the outlook was changed to negative. A third rating agency warned that weak South African economic growth and government bailouts of state-owned companies could lead the country to be downgraded tosub-investment grade. Although the country maintained its investment grade rating in 2016, downgrades may occur in the future. Any downgrade of the government issuer rating for South Africa could have a material adverse impact on AngloGold Ashanti’s creditworthiness and could dampen investors’ interest in the company’s securities.

Any further downgrade by any rating agency could further increase the company’s cost of capital, reduce its investor base and have a material adverse effect on AngloGold Ashanti’s business, results of operations and financial condition.

 

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AngloGold Ashanti expects to have significant financing requirements.

AngloGold Ashanti’s existing board-approved development projects and exploration initiatives will require significant funding.

The company’s capital expenditure plans and requirements are subject to a number of risks, contingencies and other factors, some of which are beyond its control, including volatile or sustained lower gold prices, and therefore the actual future capital expenditure and investments may differ significantly from the current planned amounts.

As a result, new sources of capital may be needed to help meet the funding requirements of these developments, to fund ongoing business activities and to pay dividends. AngloGold Ashanti’s ability to further raise and service significant new sources of capital will be a function of macroeconomic conditions, the condition of the financial markets, future gold prices, the company’s operational performance and operating cash flow and debt position, amongst other factors. The company’s ability to raise further debt financing in the future and the cost of such financing will depend on, amongst other factors, its prevailing credit rating, which may be affected by the company’s ability to maintain its outstanding debt and financial ratios at levels acceptable to the credit ratings agencies, its business prospects risks relating to the countries in which it operates or other factors. As a result, in the event of depressed gold prices, unanticipated operating or financial challenges, any dislocation in financial markets or new funding limitations, AngloGold Ashanti’s ability to pursue new business opportunities on reasonable terms, invest in existing and new projects, fund its ongoing business activities, exit projects and retire or service outstanding debt and pay dividends could be significantly constrained, all of which could adversely impact the company’s results of operations and financial condition.

Certain factors may affect AngloGold Ashanti’s ability to support the carrying amount of its property, plant and equipment, intangible assets and goodwill on the balance sheet. If the carrying amount of its assets is not recoverable, AngloGold Ashanti may be required to recognise an impairment charge, which could be significant.

AngloGold Ashanti reviews and tests the carrying amount of its assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. The company values individual mining assets at the lowest level for which cash flows are identifiable and independent of cash flows of other mining assets and liabilities.

If there are indications that impairment may have occurred, AngloGold Ashanti prepares estimates of a recoverable amount for each group of assets. Expected future cash flows are inherently uncertain, and could materially change over time. Recoverable amounts are significantly affected by Ore Reserve and production estimates, together with economic factors such as spot and forward gold prices and currency exchange rates, as well as discount rates and estimates of costs to produce Ore Reserves and future capital expenditure. Estimated rehabilitation and closure costs could also materially affect the company’s financial performance and could result in the need to recognise an impairment charge.

If any of these uncertainties occur, either alone or in combination, management could be required to recognise an impairment, which could have a material adverse effect on the company’s results of operations and financial condition. For example, during 2013, AngloGold Ashanti reviewed the carrying value of its mining assets (including ore stockpiles), goodwill and intangibles and, based on revised forecast gold prices, the company booked a charge of $3,245 million in relation to impairments, derecognition and revaluation of net realisable value of its mining assets (including ore stockpiles), goodwill and intangibles.

AngloGold Ashanti is subject to the risk of litigation, the causes and costs of which are not always known.

AngloGold Ashanti is subject to litigation, arbitration and other legal proceedings arising in the normal course of business and may be involved in disputes that may result in litigation. The causes of potential future litigation cannot be known and may arise from, amongst other things, business activities, environmental and health and safety concerns, share price volatility or failure to comply with disclosure obligations. The results of litigation cannot be predicted with certainty but could include costly damage awards or settlements, fines, and the loss of licenses, concessions, or rights, amongst other things.

In the event of a dispute, AngloGold Ashanti may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in South Africa.

AngloGold Ashanti is subject to numerous claims, including class actions or similar group claims relating to silicosis and other OLD, and could be subject to similar claims in the future. For further information, see “Item 8A: Legal Proceedings – South Africa – Silicosis litigation”. It is possible that additional class actions and/or individual claims relating to silicosis and/or other

 

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OLD will be filed against AngloGold Ashanti in the future. AngloGold Ashanti will defend all and any subsequent claims as filed on their merits. Should AngloGold Ashanti be unsuccessful in defending any such claims, or in otherwise favourably resolving perceived deficiencies in the national occupational disease compensation framework that were identified in the earlier decision by the Constitutional Court, such matters would have an adverse effect on its financial position, which could be material.

In Colombia, the company is also involved in class action lawsuits in relation to AGAC’s Santa Maria-Montecristo and La Colosa projects. One of these class action lawsuits led to a preliminary injunction suspending the mining concession contracts of the Santa Maria-Montecristo project in September 2011. Additionally, in Colombia, AGAC is involved in an action in the Administrative Superior Court of the Cundinamarca District against the Department of the Environment, Housing and Territorial Development (DoE) following its issuance of a fine against AGAC on the basis that AGAC was in breach of its mining terms of reference. See “Item 8A: Legal Proceedings – Colombia”.

Should the company be unable to resolve disputes favourably or to enforce its rights, this may have a material adverse impact on the company’s financial performance, cash flow and results of operations.

AngloGold Ashanti does not have any gold hedging instruments which exposes it entirely to commodity price decreases.

AngloGold Ashanti removed the last of its gold hedging instruments in October 2010 to provide greater participation in a rising gold price environment. As a result, AngloGold Ashanti no longer has any protection against declines in the market price of gold. The sustained decline in the price of gold experienced from 2011 through 2015 has had an adverse impact on the company’s financial condition and further deterioration could have a material adverse impact on the company’s operating results and its financial condition.

Any acquisition or acquisitions that AngloGold Ashanti may complete may expose the company to new geographic, political, legal, social, operating, financial and geological risks.

AngloGold Ashanti may pursue the acquisition of producing, development and advanced stage exploration properties and companies. Any such acquisition may change the scale of the company’s business and operations and may expose it to new geographic, geological, political, social, operating, financial, legal, regulatory and contractual risks. For example, there may be a significant change in commodity prices after the company has committed to complete the transaction and established the purchase price or share exchange ratio; a material ore body may prove below expectations; AngloGold Ashanti may have difficulty integrating and assimilating the operations and personnel of any acquired companies, realising anticipated synergies and maximising the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls; the integration may disrupt the company’s ongoing business and its relationships with employees, suppliers and contractors; and the acquisition may divert management’s attention from AngloGold Ashanti’sday-to-day business. Furthermore, the company operates and acquires businesses in different countries, with different regulatory and operating cultures, which may exacerbate the risks described above. In addition, the acquired business may have undetected liabilities which may be significant.

In the event that the company chooses to raise debt capital to finance any acquisition, the company’s leverage will be increased. Should the company choose to use equity as consideration for an acquisition, existing shareholders may suffer dilution. Alternatively, the company may choose to finance any acquisition with its existing resources, which could decrease its ability to fund future capital expenditures.

The company may not be successful in overcoming these risks or any other problems encountered in connection with acquisitions. Failure by AngloGold Ashanti to implement its acquisition strategy or to integrate acquired businesses successfully could have material adverse effects on its growth and business results.

Ageing infrastructure at some of AngloGold Ashanti’s operations could adversely impact its business.

Deep level gold mining shafts are usually designed with a lifespan of 25 to 30 years. Vertical shafts consist of large quantities of infrastructure steelwork for guiding conveyances and accommodating services such as high and low tension electric cables, air and water pipe columns. Rising temperatures in the deeper mining areas can also lead to increased cooling requirements in the form of upgraded and expanded ice plants. Maintaining this infrastructure requires skilled human resources, capital allocation, management and planned maintenance. Once a shaft has reached the end of its intended lifespan, higher than normal maintenance and care is required. Incidents resulting in production delays, increased costs or industrial accidents may occur. Such incidents may have an adverse effect on the company’s results of operations and financial condition.

 

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Asset integrity and reliability issues relating to ageing infrastructure are of concern at many operations, but are of particular concern in South Africa and at the Obuasi mine in Ghana. Furthermore in Tanzania, cracks were discovered in the mill feed end in September 2008 and at the discharge end in February 2010 at the Geita gold mine. The Geita gold mine is one of the group’s principal assets and sources of cash flow. After initial repairs, the feed end was replaced during May and June 2011. Production throughput in 2011 was one million tonnes lower than planned, as a result of mill downtime that included feed end replacement. The Geita gold mine produced approximately 531,000 ounces in 2012, with production throughput approximately 100,000 tonnes short of budget. A decision was subsequently taken to replace the entire mill as a result of shell distortion. After new mill manufacture delays, installation was completed during March 2013. Ageing infrastructure may have an adverse effect on the company’s results of operations and financial condition in the future.

Some of AngloGold Ashanti’s technologies are unproven and the failure of such technologies could adversely impact costs and production.

AngloGold Ashanti has created a Technology Innovation Consortium (ATIC) and teamed up with various specialists to engineer new solutions to environmental management, mine design, mining technology and methods and underground logistics, amongst other matters. The company has invested in new technologies, including phyto-technologies to reduce seepage and address soil and groundwater contamination, andin-mine support technologies to minimise the impact of seismic activity. The company is also attempting to develop technologies to access the deeper reaches of its South African mines, including rock boring, different hammer configurations and dimensions for drilling, thermal spalling and an ultra-high strength backfill product and system.

Some aspects of these technologies are unproven and their eventual operational outcome or viability cannot be assessed with certainty. AngloGold Ashanti may be unable to successfully put into operation the technological step changes developed and proposed by ATIC. The costs, productivity and other benefits from these initiatives, and the consequent effects on AngloGold Ashanti’s future earnings and financial condition, may vary from expectations. The company’s failure to realise the anticipated benefits could result in increased costs, an inability to realise production or growth plans, or adversely affect its operational performance.

AngloGold Ashanti does not have full management control over some of its significant joint venture projects and other interests. If the operators of these projects do not manage these effectively and efficiently, the company’s investment in these projects could be adversely affected and its reputation could be harmed.

AngloGold Ashanti’s joint ventures at Morila in Mali and at Kibali in the DRC are managed by the company’s joint venture partner Randgold Resources Limited (Randgold). In addition, certain of AngloGold Ashanti’s exploration ventures are managed by the relevant joint venture partner.

Whilst AngloGold Ashanti provides strategic management and operational advice to its joint venture partners in respect of these projects, the company cannot ensure that these projects are operated in compliance with the standards that AngloGold Ashanti applies in its other operations. If these joint ventures are not operated effectively or efficiently, including as a result of weaknesses in the policies, procedures and controls implemented by the joint venture partners, the company’s investment in the relevant project could be adversely affected. In addition, negative publicity associated with operations that are ineffective or inefficiently operated, particularly relating to any resulting accidents or environmental incidents, could harm the company’s reputation and therefore its prospects and potentially its financial condition. Furthermore, any failure of joint venture partners to meet their obligations to AngloGold Ashanti or to third parties, or any disputes with respect to the parties’ respective rights and obligations, could have a material adverse impact on AngloGold Ashanti’s results of operations and financial condition. In particular, the company and Randgold retain equal representation, with neither party holding a deciding vote, on the board of the two companies that have overall management control of the Morila project in Mali and the Kibali project in the DRC, respectively, and all major management decisions for each of these two projects, including approval of the budget, require board approval. If a dispute arises between the company and Randgold with respect to the Kibali or Morila project and the parties are unable to amicably resolve such dispute, it may be difficult for the parties to make strategic decisions relating to the project affected by such dispute, theday-to-day operations and the development of such project may be adversely affected and the company may have to participate in proceedings to resolve the dispute, which could adversely affect the company’s results of operations and financial condition.

AngloGold Ashanti’s joint venture partners may have economic or business interests or goals that are not consistent with the company’s or may, as a result of financial or other difficulties, be unable or unwilling to fulfill their obligations under the joint venture or other agreements. Disputes between the company and its joint venture partners may lead to legal action, including litigation between AngloGold Ashanti and its joint venture partners. Such disputes could adversely affect the operation of the joint venture and may prevent the realisation of the joint ventures’ goals. There is no assurance that the company’s joint venture partners will continue their relationship with the company in the future or that the company will be able to achieve its financial or strategic objectives relating to the joint ventures.

 

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The prevalence of occupational health diseases and other diseases and the potential costs and liabilities related thereto may have an adverse effect on the business and results of operations of AngloGold Ashanti.

The primary areas of focus in respect of occupational health of employees within the company’s operations are noise-induced hearing loss and occupational lung diseases (OLD), which include pulmonary diseases such as tuberculosis from various causes and silicosis in individuals exposed to silica dust. These require active dust management strategies in underground operations, particularly in South Africa where a significant number of silicosis cases by current and former employees alleging past exposures are still reported each year to the board for statutory compensation. AngloGold Ashanti provides occupational health services to its employees at its occupational health centres and clinics and runs preventative occupational hygiene initiatives, such as implementing various dust control measures and supplying the company’s employees with respiratory protection equipment. If the costs associated with providing such occupational health services, implementing such dust control measures or supplying such equipment increase significantly beyond anticipated or budgeted amounts, this could have an adverse effect on AngloGold Ashanti’s results of operations and financial condition. Actual and alleged health and safety incidents or breaches of standards may also adversely impact the company’s reputation.

AngloGold Ashanti is currently subject to numerous claims, including class action litigation, with respect to alleged occupational lung diseases (see “—AngloGold Ashanti is subject to the risk of litigation, the causes and costs of which are not always known”). AngloGold Ashanti is working with the industry to engage with government (and other stakeholders) to seek an appropriate industry-wide solution. An industry-wide solution may not be reached or the terms of any such solution may have a material adverse effect on AngloGold Ashanti’s financial condition. See “Item 8A: Legal Proceedings” and “Item 18: Note 31 – Contractual Commitments and Contingencies”.

In response to the effects of silicosis in labour-sending communities, a number of mining companies (under the auspices of the Chamber of Mines of South Africa) together with the NUM, which is the largest union in the mining sector in South Africa, and the national and regional departments of health, have embarked on a project to assist in delivering compensation and relief by mining companies under the Occupational Diseases in Mines and Works Act (ODMWA) to affected communities.

AngloGold Ashanti also faces certain risks in dealing with HIV/AIDS, particularly at its South African operations, and with tropical disease outbreaks such as malaria, and other diseases which may have an adverse effect on the company’s results of operations and financial condition. AIDS and associated diseases remain one of the major health care challenges faced by AngloGold Ashanti’s South African operations. Workforce prevalence studies indicate that HIV prevalence rates amongst AngloGold Ashanti’s South African workforce may be as high as 30 percent.

Malaria and other tropical diseases pose significant health risks at all of the company’s operations in central, west and east Africa where such diseases may assume epidemic proportions because of ineffective national control programmes. Malaria is a major cause of death in young children and pregnant women but also gives rise to fatalities and absenteeism in adult men. Other conditions such as heart disease, chronic diseases and obesity are of increasing incidence and concern.

Such diseases impair the health of workers and negatively affect productivity and profitability as a result of workers’ diminished focus or skill, absenteeism, treatment costs and allocated resources. Any current or future medical programme may not be successful in preventing or reducing the infection rate amongst AngloGold Ashanti’s employees or in affecting consequent illness or mortality rates. AngloGold Ashanti may incur significant costs in addressing these issues in the future, which could also adversely impact the company’s results of operations and financial condition.

The costs and impacts associated with the pumping of water inflows from closed mines adjacent to the company’s operations could have an adverse effect on its results of operations.

Certain of AngloGold Ashanti’s mining operations are located adjacent to the mining operations of other mining companies. The closure of a mining operation may have an impact upon continued operations at the adjacent mine if appropriate preventative steps are not taken, including the ingress of underground water when pumping operations at the adjacent closed mine are suspended. Such ingress could have an adverse effect on any one of the company’s mining operations as a result of property damage, disruption to operations, additional pollution liabilities and pumping costs and, consequently, could have an adverse impact on its results of operations and financial condition.

 

 

Some of the mining operations adjacent to AngloGold Ashanti’s operations in South Africa have been closed. For example, in May 2013, Village Main Reef (VMR) announced its intention to wind down its Buffels (Hartebeesfontein and Buffelsfontein) operations adjacent to AngloGold Ashanti’s Vaal River operations, effectively transitioning their operations to closure. After VMR ceased pumping of underground water at its Buffelsfontein and Hartebeesfontein operations,

 

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AngloGold Ashanti prepared plans to manage underground water that it anticipated would eventually reach its operations. The infrastructure to pump this water out from underground was completed in December 2015, with an accelerated project plan. Water entered Great Noligwa on 23 January 2016. The water is currently being used by the process plants as water inventories are low as a result of the recent drought.

 

In the West Wits district, Blyvooruitzicht Gold Mining Company was placed in provisional liquidation in August 2013. AngloGold Ashanti has secured a court order for access rights to Blyvoor 4 and 6 shafts to keep pumping going. AngloGold Ashanti has also incorporated Covalent Water Company, which has purchased rights of access, electricity etc. to the 4 and 6 shafts as well as the relevant infrastructure, to continue pumping underground water. This has reduced the risk of flooding at the company’s West Wits Operations, but the company can provide no assurance that flooding will not occur, which could have an adverse impact on its results of operations and financial condition.

The potential costs associated with the remediation and prevention of groundwater contamination from the company’s operations or due to flooding from closed mines adjacent to the company’s operations could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.

AngloGold Ashanti has identified groundwater contamination plumes at certain of its operations that have occurred primarily as a result of seepage from surface operations and facilities, including tailings storage facilities and waste rock piles.

Deep groundwater contamination is a significant issue in South Africa, where groundwater in some older mining regions has infiltratedmined-out workings. Potential contamination risk to shallow ground and surface water resources can occur when water is exposed to sulphide-bearing rock in such situations. AngloGold Ashanti has identified a flooding and future pollution risk posed by deep groundwater in the Klerksdorp and Far West Rand goldfields. AngloGold Ashanti’s Vaal River operations are part of the Klerksdorp goldfields and its West Wits operations are part of the Far West Rand goldfields. As a result of the interconnected nature of underground mining operations in South Africa, any proposed solution needs to be a combined one supported by all the companies owning mines located in these goldfields.

In view of the limitation of current information for the accurate estimation of liabilities, no reliable estimate can be made for these obligations. The potential costs of remediation and prevention of groundwater contamination at AngloGold Ashanti’s operations could be significant and may have a material adverse impact on AngloGold Ashanti’s results of operations and financial condition.

The occurrence of events for which AngloGold Ashanti is not insured or for which its insurance is inadequate may adversely affect cash flows and overall profitability.

AngloGold Ashanti maintains insurance to protect against events which could have a significant adverse effect on its operations and profitability. This insurance is maintained in amounts that the company believes to be reasonable depending upon the circumstances surrounding each identified risk. However, damage and third-party claims arising from catastrophic events may exceed the limit of liability covered under these insurance policies. Furthermore, AngloGold Ashanti’s insurance does not cover all potential risks associated with its business and may exclude certain parts of its business. AngloGold Ashanti may elect not to insure certain risks due to the high premiums or for various other reasons, including an assessment that the risks are remote.

In order to mitigate the cost of its insurance program, AngloGold Ashanti may in some instances retain a portion of the financial loss associated with an insurable event. These financial losses could be significant and have an adverse effect on its financial condition.

Insurance for certain risks in particular, such as loss of title to mineral property, political risks in certain jurisdictions, environmental pollution, or other hazards resulting from exploration and production, is not generally available to mining companies on acceptable terms. The availability and cost of insurance coverage can vary considerably from year to year as a result of events beyond the company’s control or as a result of previous claims. This can result in higher premiums and periodically being unable to maintain the levels or types of insurance the company typically carries.

The failure to obtain adequate insurance could impair the company’s ability to continue to operate in the normal course of its business. This could adversely impact its cash flows, results of operations and financial condition.

 

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The implementation of an integrated Enterprise Resource Planning (ERP) system could have an adverse effect on AngloGold Ashanti’s results of operations and financial condition.

AngloGold Ashanti continues to implement a single, global ERP system to support all the operations that it manages. The implementation and operationalisation of an ERP system on a global basis is an inherently high-risk initiative due to the potential for implementation cost and time overruns. In addition, if AngloGold Ashanti experiences difficulties with the implementation and operation of the system, the company’s ability to report and manage technical and financial information could be compromised, which could have an adverse effect on the company’s results of operations and financial condition.

Any similar future problems with the implementation, operation or maintenance of the ERP system could have an adverse effect on the company’s financial condition.

Sales of large quantities of AngloGold Ashanti’s ordinary shares and American Depository Shares (ADSs), and the perception that these sales may occur or other dilution of the company’s equity, could adversely affect the prevailing market price of the company’s securities.

The bulk of AngloGold Ashanti’s shares are held by a relatively small number of investors. According to information available to the company, AngloGold Ashanti’s five largest shareholders beneficially owned 30.20 percent and the top 10 largest beneficially owned 42.33 percent of AngloGold Ashanti’s ordinary shares as at 31 December 2016.

Poor returns, soaring costs, higher capital expenditure,ill-conceived corporate activity, rising geopolitical and labour risk, a material decrease in the price of gold and low dividend yields from 2011 through 2015 have resulted in a change in market sentiment towards gold equities. The market price of the company’s securities could fall if large quantities of ordinary shares or ADSs are sold in the public market, if there is divestment by certain types or groupings of investors, or if there is the perception in the marketplace that such sales could occur. Subject to applicable securities laws, holders of the company’s ordinary shares or ADSs may decide to sell them at any time.

The market price of the company’s ordinary shares or ADSs could also fall as a result of any future offerings AngloGold Ashanti makes of its ordinary shares, ADSs, or securities exchangeable or exercisable for the company’s ordinary shares or ADSs, or the perception in the marketplace that these offerings might occur. AngloGold Ashanti may make such offerings, including offerings of additional ADS rights, share rights or similar securities, at any time or from time to time in the future.

Fluctuations in the exchange rate of currencies may reduce the market value of AngloGold Ashanti’s securities, as well as the market value of any dividends or distributions paid by the company.

AngloGold Ashanti has historically declared all dividends in South African rands. As a result, exchange rate movements may have affected the Australian dollar, the British pound, the Ghanaian cedi and the U.S. dollar value of these dividends, as well as of any other distributions paid by the relevant depositary to holders of the company’s securities.

Furthermore, AngloGold Ashanti’s Memorandum of Incorporation allows for dividends and distributions to be declared in any currency at the discretion of the board of directors or the company’s shareholders at a general meeting. If, and to the extent that, AngloGold Ashanti opts to declare dividends and distributions in U.S. dollars, exchange rate movements will not affect the U.S. dollar value of any dividends or distributions. Nevertheless, the value of any dividend or distribution in Australian dollars, Ghanaian cedis or South African rands will continue to be affected. If and to the extent that dividends and distributions are declared in South African rands in the future, exchange rate movements will continue to affect the Australian dollar, Ghanaian cedi and U.S. dollar value of these dividends and distributions. This may reduce the value of the company’s securities to investors. Additionally, the market value of AngloGold Ashanti’s securities as expressed in Australian dollars, Ghanaian cedis, U.S. dollars and South African rands will continue to fluctuate in part as a result of foreign exchange fluctuations.

AngloGold Ashanti may not pay dividends or make similar payments to shareholders in the future.

AngloGold Ashanti pays cash dividends only if there are sufficient funds available for that purpose. Fund availability depends upon many factors, including the amount of cash available, taking into account AngloGold Ashanti’s capital expenditure on existing infrastructure and exploration and other projects. Additionally, under South African law, a company is entitled to pay a dividend or similar payment to its shareholders only if the company meets the solvency and liquidity tests set out in legislation and the company’s founding documents.

Given these factors, including the capital and investment needs of AngloGold Ashanti, and the board of directors’ discretion to declare a dividend (including the amount and timing thereof), cash dividends may not be paid in the future.

 

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U.S. securities laws do not require AngloGold Ashanti to disclose as much information to investors as a U.S. issuer is required to disclose, and investors may receive less information about the company than they might otherwise receive from a comparable U.S. company.

AngloGold Ashanti is subject to the periodic reporting requirements of the SEC and the New York Stock Exchange that apply to “foreign private issuers”. The periodic disclosure required of foreign private issuers under applicable rules is more limited than the periodic disclosure required of U.S. issuers. For example, on 22 February 2016, AngloGold Ashanti announced that it would no longer voluntarily publish reviewed financial statements and analyses of operating and financial results for the quarters ended 31 March and 30 September each year. As a result of this transition to half-yearly reporting, investors will receive less information about AngloGold Ashanti than they have in previous years. They will also receive less timely financial reports than they otherwise might receive from a comparable U.S. company or from certain of the company’s peers in the industry. This may have an adverse impact on investors’ ability to make decisions about their investment in AngloGold Ashanti.

 

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ITEM 4: INFORMATION ON THE COMPANY

 

4A.

HISTORY AND DEVELOPMENT OF THE COMPANY

GROUP INFORMATION

AngloGold Limited was formed in June 1998 with the consolidation of the gold mining interests of Anglo American plc. AngloGold Ashanti Limited, as the company exists today, was formed on 26 April 2004 following the business combination between AngloGold and Ashanti Goldfields Company Limited.

CURRENT PROFILE

AngloGold Ashanti Limited is headquartered in Johannesburg, South Africa. The company (Registration number 1944/017354/06) was incorporated in the Republic of South Africa in 1944 under the name of Vaal Reefs Exploration and Mining Company Limited and operates under the South African Companies Act, No. 71 of 2008, as amended (the Companies Act).

Its registered office is at 76 Rahima Moosa Street, Newtown, Johannesburg, South Africa, 2001. Telephone: +27 11 637 6000.

While AngloGold Ashanti’s primary listing is on the Johannesburg Stock Exchange (JSE), the company is also listed on the New York Stock Exchange (NYSE), the Ghana Stock Exchange (GhSE) and the Australian Securities Exchange (ASX).

HISTORY AND SIGNIFICANT DEVELOPMENTS

Below are highlights of key corporate activities from 1998:

1998

 

Formation of AngloGold Limited through the consolidation of East Rand Gold and Uranium Company Limited; Eastvaal Gold Holdings Limited; Southvaal Holdings Limited; Free State Consolidated Gold Mines Limited; Elandsrand Gold Mining Company Limited; H.J. Joel Gold Mining Company Limited and Western Deep Levels Limited into a single, focused, independent gold mining company. Vaal Reefs Exploration and Mining Company Limited (Vaal Reefs), the vehicle for the consolidation, changed its name to AngloGold Limited and increased its authorised share capital, effective 30 March 1998.

1998-2004

 

Expansion of AngloGold Limited’s operations outside of South Africa.

2004

 

Conclusion of the business combination with Ashanti Goldfields Company Limited, at which time the company changed its name to AngloGold Ashanti Limited.

2007

 

Sale by Anglo American plc of 69,100,000 ordinary shares of AngloGold Ashanti, thereby reducing Anglo American’s shareholding in AngloGold Ashanti from 41.7 percent to 16.6 percent.

2009

 

Sale by Anglo American plc of its remaining shareholding in AngloGold Ashanti to Paulson & Co. Inc.

2010

 

Elimination of AngloGold Ashanti’s hedge book, thereby gaining full exposure to spot gold prices.

2012

 

Acquisition of the remaining 50 percent interest in Serra Grande in Brazil for $215 million.

 

Acquisition of 100 percent of First Uranium (Proprietary) Limited for $335 million.

2013

 

Commission of two new gold projects – Tropicana and Kibali – in the second half of 2013.

2015

 

Sale of the Cripple Creek & Victor gold mine in the USA for $819 million.

CAPITAL EXPENDITURE

For information concerning the company’s principal capital expenditures and divestitures currently in progress, including the distribution of these investments geographically and the method of financing, refer “Item 4B: Business Overview–AngloGold Ashanti Global Operations: 2016”, “Item 5A: Operating Results–Capital expenditure” and “Item 5B: Liquidity and Capital Resources”.

 

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4B.

BUSINESS OVERVIEW

AngloGold Ashanti, a gold mining company with a globally diverse, world-class portfolio of operations and projects, is headquartered in Johannesburg, South Africa. AngloGold Ashanti is the third largest gold mining company in the world, measured by production.

Our business activities span the full spectrum of the mining value chain and take into account the impact of our activities on the varied and many communities and environments in which we operate.

PRODUCTS

AngloGold Ashanti’s main product is gold. Once mined, the gold ore is processed into doré (unrefined gold bars) on site and then dispatched to precious metals refineries for refining to a purity of at least 99.5%, in accordance with the standards of ‘good delivery’ as determined by the London Bullion Market Association (LBMA). This refined gold is then sold directly to bullion banks.

By-products of our gold mining operations, often a function of local geological characteristics, include silver in Argentina, sulphuric acid in Brazil and uranium in South Africa.

OPERATIONS

Our portfolio of 17 mines in nine countries, comprises long-life, relativelylow-cost assets with differing ore body types, located in key gold-producing regions. A number of these assets are strongly leveraged to energy costs and currencies.

Our operations are grouped regionally as follows:

 

 

South Africa (Vaal River, West Wits and Surface Operations)

 

Continental Africa (Democratic Republic of the Congo, Ghana, Guinea, Mali and Tanzania)

 

Americas (Argentina and Brazil)

 

Australasia (Australia)

These operating assets are supported by greenfield projects and a focused exploration programme.

Given the current market environment, and with limited access to financial capital, we are working to allocate available capital responsibly and in line with business requirements. At the same time we are identifying and implementing operational efficiencies, reducing overhead structures, improving capital discipline and pursuing other initiatives to improve underlying business performance, with an emphasis on workplace safety. Our overall focus remains continued debt reduction to further strengthen our balance sheet, while working to improve the quality of our portfolio and to unlock value from the Colombian portfolio and Obuasi.

By using our human capital efficiently and effectively, group support functions cover planning and technical, strategy, sustainability, finance, human resources, and legal and stakeholder relations. The planning and technical function focuses on the management of opportunities and the maintenance of long-term optionality, ensuring optimal use of our human capital and expertise, through a range of activities that includes brownfield and greenfield exploration, innovative research and technology development with a focus on mining excellence.

EXPLORATION

Our exploration programme is aimed at providing an organic growth pipeline through which to create significant value for the company.

Greenfields and brownfields exploration takes place in both established and new gold-producing regions through managed andnon-managed joint ventures, strategic alliances and wholly-owned ground holdings. AngloGold Ashanti’s discoveries include La Colosa, Gramalote and Quebradona (Nuevo Chaquiro) in Colombia and Tropicana in Australia.

 

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GOLD MARKET

In 2016, the gold price was a story of two halves, where the price turned higher from late 2015 and continued to rally during the first half of 2016, with the price peaking at $1,374.91/oz. The year was eventful worldwide – from the sharpsell-off in Chinese equities to apick-up in friction between Saudi Arabia and Iran – helping to drive up the gold price. The most surprising global events of 2016 – the British referendum to leave the European Union (Brexit), and the unexpected victory of Donald Trump as US president elect – each had an impact on the gold price.

As always, there were more factors which contributed to the rise and fall of the gold price, and the most influential factor during 2016 was the US dollar. The absence of any increase in US interest rates during the first half of the year allowed gold to rally. However, as the US economy started to improve towards the end of the year, increasing the likelihood of a rate hike in quarter four, the gold price began to wane. The Federal Open Market Committee (FOMC) meeting on 14 December 2016 decided to increase US interest rates by 25 basis points but more importantly, the FOMC signalled a more hawkish stance toward the US interest rate environment ahead, signalling the potential for three further rate hikes in 2017. This supported the US dollar and placed gold under considerable pressure with the price touching a low of $1,122.35/oz on 15 December, before recovering and closing the year at $1,151.46/oz.

The rally in the gold price for the first half of the year was driven largely by the revival of exchange-traded fund (ETF) demand which saw many investors returning to gold. In addition to the headline events described above, continued sluggish economic growth across the globe, despite the attempts by central banks to reflate economies, made gold the preferredgo-torisk-off asset. ETF holdings were up 45 percent at their peak, at 72.8Mozs. However, as the outlook for the US economic growth started to improve in the second half of the year, this demand started to fade and even reverse. Following the outcome of the US elections in November, this liquidation intensified on the back of a combination of higher interest rates and expectations of a stronger US dollar. ETF holdings closed the year at 65.02Moz which was 30 percent higher than the opening position of 50.2Mozs.

Since 2011, the central bank community has established itself as a very important demand side factor, adding to existing gold holdings in order to either diversify or bolster reserves. Central banks continued to be net buyers in 2016 with their purchasing trend, although to a lesser extent compared to the previous years. In 2016, central banks collectively purchased 383.6t of gold compared to 566t in 2015, a reduction of 33 percent. Despite this, 2016 was the seventh consecutive year of net purchases by central banks. Central bank purchases in 2016 were led by Russia, China and Kazakhstan. Together they accounted for around 80 percent of purchases for the full year.

Sales from central banks were, once again, negligible for the 2015-2016 period at 3.07 tonnes (2014-2015 period at 3.39t). The bulk of these were made by the German Bundesbank as part of its gold coin programme.

JEWELLERY DEMAND

Investment demand continued to decline in December as gold ETF and fund outflows remained at a relatively high level of 3.1Moz in December, albeit lower than November outflows of 3.9Moz.

Demand from the gold jewellery market, dominated by India and China, which together account for almost 60% of jewellery demand, was somewhat disappointing. In China, households seemed to be spending their income on luxury items and investing in property rather than gold. India, on the other hand, had various hindrances including asix-week strike by jewellers, increased government regulations (including higher taxes and duties on gold imports), and a poor harvest. The poor harvest led to apick-up in the rural community selling gold in order to make up for loss of income from farming, whilst the impact of demonetisation continued to affect gold demand.

The higher gold prices during the year encouraged an increase in scrap metal entering the market while recycled gold increased by 17 percentyear-on-year to 42.07Moz in 2016. Mine supply remained virtually unchanged from 2015 levels with production of 3.236t and 3.233t recorded for the two periods respectively.

COMPETITION

As gold mining is a mature and regulated industry, and very significant volumes of gold and gold derivatives trade in the world markets independent of gold mine supply, AngloGold Ashanti does not consider that competition for sales plays any role in its operations as a gold producer. For more information on a geographical analysis of gold income by destination, refer “Item 18: Note 2 – Segmental Information”.

 

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However, gold producers do compete against each other for acquisition of mining assets, exploration opportunities and human resources. See “Item 3D: Risk Factors”.    

SEASONALITY

Subject to other factors and unforeseen circumstances, quarter one production is generally lower than production during the rest of the year as a result of theramp-up of operations after annual holiday production declines.

RAW MATERIALS

AngloGold Ashanti uses chemicals, including cyanide and lime, in the production of gold. These chemicals are available from a large number of suppliers and do not represent a material portion of the company’s costs.

STRATEGY

AngloGold Ashanti’s core strategic focus is to generate sustainable cash flow improvements and returns by focusing on five key areas, namely: people, safety and sustainability; ensuring financial flexibility; actively managing all expenditures; improving the quality of our portfolio; and maintaining long-term optionality.

Strategic focus areas

AngloGold Ashanti’s five strategic focus areas are set out below:

 

 

Focus on people, safety and sustainability. People are the foundation of our business. Our business must operate according to our values if it is to remain sustainable in the long term.

 

Promote financial flexibility. We must ensure our balance sheet always remains able to meet our core funding needs.

 

Optimise overhead costs and capital expenditure. All spending decisions must be thoroughly scrutinised to ensure they are optimally structured and necessary to fulfil our core business objective.

 

Improve portfolio quality. We have a portfolio of assets that must be actively managed to improve the overall mix of our production base as we strive for a competitive valuation as a business.

 

Maintain long-term optionality. While we are focused on ensuring the most efficientday-to-day operation of our business we must keep an eye on creating a competitive pipeline of long-term opportunities.

INTELLECTUAL PROPERTY

AngloGold Ashanti, as a group, is not dependent on intellectual property for the conduct of its business as a whole.

THE REGULATORY ENVIRONMENT ENABLING ANGLOGOLD ASHANTI TO MINE

AngloGold Ashanti’s rights to own and exploit Ore Reserve and deposits are governed by the laws and regulations of the jurisdictions in which these mineral properties lie.

AngloGold Ashanti is subject to a wide range of laws and regulations governing all aspects of its operations, including such areas as environmental protection, reclamation, exploration, development, production, taxes, immigration, labour standards and employment issues, occupational health, mine safety, toxic substances and wastes, securities and foreign corrupt practices. AngloGold Ashanti has made, and expects to make in the future, significant expenditures to comply with these laws and regulations.Non-compliance can result in violations and legal claims, as well as substantial fines, penalties, reputational damage and delays inday-to-day operations. Pending or proposed changes to existing laws and regulations, as well as any proposed or contemplated new laws or regulations could also have significant impacts on AngloGold Ashanti’s business and results of operations, the extent of which cannot always be predicted.

There are in some cases certain restrictions on AngloGold Ashanti’s ability to independently move assets out of certain countries in which it has operations, or transfer assets within the group, without the prior consent of the local government or minority shareholders involved. See “Item 10D: Exchange controls” for details.

 

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For more information on the risks and uncertainties associated with AngloGold Ashanti’s mining rights, see “Item 3D: Risk factors”, in particular the risk factors entitled “AngloGold Ashanti’s mining rights in the countries in which it operates could be altered, suspended or cancelled for a variety of reasons, including breaches in its obligations in respect of its mining rights”, “Failure to comply with laws, regulations, standards, contractual obligations whether following a breach or breaches in governance processes or fraud, bribery and corruption may lead to regulatory penalties, loss of licences or permits, negative effects on AngloGold Ashanti’s reported financial results, and adversely affect its reputation”, “Title to AngloGold Ashanti’s properties may be uncertain and subject to challenge”, “AngloGold Ashanti’s mineral deposits, Ore Reserve, and mining operations are located in countries where political, tax and economic laws and policies may change rapidly and unpredictably and such changes and policies may adversely affect both the terms of its mining concessions, as well as its ability to conduct operations in certain countries” and “AngloGold Ashanti’s Ore Reserve, deposits and mining operations are located in countries that face instability and security risks that may adversely affect both the terms of its mining concessions, as well as its ability to conduct operations in certain countries”.

South Africa

The MPRDA

The Mineral and Petroleum Resources Development Act (MPRDA) came into effect on 1 May 2004. The objectives of the MPRDA are, amongst other things, to allow for state sovereignty over all mineral and petroleum resources in the country, to promote economic growth and the development of these resources and to expand opportunities for the historically disadvantaged. Another objective of the MPRDA is to ensure security of tenure for the respective operations concerning prospecting, exploration, mining and production. By virtue of the provisions of the MPRDA, the state ensures that holders of mining and prospecting rights contribute to the socioeconomic development of the areas in which they operate.

The Mineral and Petroleum Resources Development Amendment Act (MPRDAA) was passed by Parliament in 2008 and became effective on 7 June 2013. Its purpose is to amend the MPRDA in order to, amongst other things:

 

 

make the Minister of Mineral Resources (Minister) the responsible authority for implementing the requirements of the National Environmental Management Act of 1998 (NEMA) and specific environmental legislation as they relate to prospecting, mining, exploration, production and related activities incidental thereto on the prospecting, mining, exploration or production area;

 

align the MPRDA with the NEMA in order to provide for one environmental management system;

 

remove ambiguities in certain definitions;

 

add functions to the Regional Mining Development and Environmental Committee;

 

amend transitional arrangements so as to further afford statutory protection to certain existing old order rights; and

 

provide for matters connected therewith.

When the MPRDAA came into effect on 7 June 2013, only selected provisions became effective immediately. The MPRDAA contains the following provisions, amongst others:

 

 

Environmental authorisations: Provides for a prohibition on any prospecting and mining, or conducting technicalco-operation operations, reconnaissance operations or any incidental work without an environmental authorisation (since 7 December 2014), permit and at least 21 days’ written notice to the landowner or lawful occupier.

 

Historic residues: Provides that the definitions of “residue stockpile” and “residue deposit” now include an old order right. This provision is intended to make old order dumps subject to the MPRDA so that old order dumps which are part of a mining area covered by a new order mining right could only be treated by the holder of the new order rights. Old order dumps not covered by a new order mining right would be considered a residue deposit to which the Minister would have discretion to grant rights.

 

Applications: Provides that applicants for prospecting and mining rights must (since 7 December 2014) lodge an application for an environmental authorisation simultaneously with the application for rights. The Department of Mineral Resources should no longer accept more than one application in respect of the same area and mineral.

 

Environmental regulation: Provides that the Minister is the responsible authority for implementing environmental provisions under NEMA as it relates to prospecting, mining, exploration, production or activities incidental thereto on a prospecting, mining, exploration or production area. An environmental authorisation issued by the Minister shall be a condition prior to the issuing of a permit or the granting of a right in terms of the MPRDA.

 

Closure certificates: Provides that previous holders of old order rights or previous owners of works that have ceased to exist remain responsible for any environmental liability until the Minister issues a closure certificate.

 

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On 27 December 2012, the Minister published the Draft Mineral and Petroleum Resources Development Bill, 2012 (2012 Bill) which sought to amend the MPRDA and invited the mining industry and interested and affected parties to comment on it by 8 February 2013. On 21 June 2013, a revised version of the Bill (2013 Bill) was introduced to the National Assembly. The 2013 Bill underwent a public participation process and extensive comments were received from the general public. Following a consultative process with the Department of Mineral Resources (DMR), the State Law Advisors and the general public, the Portfolio Committee on Mineral Resources (Portfolio Committee) introduced an amended version of the 2013 Bill to the South African Parliament.

The 2013 Bill seeks to amend the MPRDA, to, amongst other things:

 

remove ambiguities;

 

provide for regulation of associated minerals, partitioning of rights, and enhanced provisions on mineral beneficiation;

 

promote national energy security;

 

streamline administrative processes; and

 

enhance sanctions.

The 2013 Bill, as currently drafted, contains, amongst others, the following provisions:

 

Applications: The 2013 Bill proposes revising the application system by replacing the “first come, first served” system with a tender and allocation system. This would dramatically affect the way applications are made.

 

Beneficiation: The 2013 Bill extends the concept of beneficiation (which has been defined in the 2013 Bill as “transformation, value addition or downstream beneficiation of a mineral or mineral product (or a combination of minerals) to a higher value product, over baselines to be determined by the Minister, which can either be consumed locally or exported”) and would allow the Minister to prescribe the quantities, qualities and timelines at which certain designated commodities must be supplied to local beneficiators at a mine gate price or an agreed price. The reference to the mine gate price appears to suggest companies can recover costs, capital expenditure and make a profit. It is not clear whether the “agreed price” will have general application or whether it will be determined on acase-by-case basis. Another proposed amendment provides that written consent would have to be obtained before exporting of “designated minerals” if the producer or associated company has not offered minerals to local beneficiators. The Minister would have discretion to decide which minerals are to be designated.

 

Residue stockpiles: The MPRDAA’s inclusion of residue deposits and residue stockpiles in the definition of land, creating a “statutory accession” of movable dumps back to the land, is discussed above. The 2013 Bill would extend this definition to include historic mines and dumps created before the implementation of the MPRDA. The 2013 Bill also seeks to make these historic dumps subject to the MPRDA. This is to be achieved by making the working of these dumps subject to a mining right issued under the MPRDA. There is a transition period of two years to enable owners of these dumps to either apply for mining rights or incorporate them in existing mining rights.

 

Partitioning of rights and transfers of interests in companies: Section 11 of the MPRDA currently requires that transfer of a controlling interest in an unlisted company be consented to by the Minister. The 2013 Bill proposes amending the MPRDA so that transfer of a controlling interest in listed companies and transfer of any interest in unlisted companies must be consented to by the Minister. The 2013 Bill further proposes amending the MPRDA to allow for an application for ministerial consent to be made to transfer a part of a right.

 

Mine closure: The 2013 Bill provides for two major changes to mine closure under the MPRDA. Firstly, the MPRDA would be amended so that a mining company could still incur environmental liability even after obtaining a closure certificate relative to a mine. Secondly, any portion of the financial provision paid in terms of section 41 of the MPRDA may be retained by the Minister for latent and residual environmental impacts which may become known in the future for such time period as the Minister may determine, having regard to the circumstances relating to the relevant operation, which portion and time period must be determined in the prescribed manner.

 

Penalties: The 2013 Bill also provides for revised penalties for violations of the MPRDA by making provision for both an administrative fine not exceeding 10 per cent of the person or holder’s annual turnover and exports during the preceding year, and imprisonment not exceeding four years.

 

Legislative force of the Charter and Codes: The 2013 Bill proposes amending the definition of “this Act” in the MPRDA so that the MPRDA will include the Revised Mining Charter (defined below), the Code of Good Practice for the South African Mineral Industry (Code) and the Housing and Living Conditions Standard. This would give these documents the force of law.

The 2013 Bill was passed by the National Assembly on 12 March 2014 and passed by the National Council of Provinces (NCOP) on 27 March 2014. The 2013 Bill was sent to the President of the Republic of South Africa (President) for assent. On 16 January 2015, the President referred the 2013 Bill back to the National Assembly to accommodate his reservations

 

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around the constitutionality of the 2013 Bill. The 2013 Bill was considered by the Portfolio Committee on Mineral Resources who tablednon-substantial revisions to the 2013 Bill, which revisions were passed by the National Assembly and referred to the NCOP on 1 November 2016. The NCOP select committee on land and mineral resources is currently undergoing a public participation process on this version of the 2013 Bill. If the NCOP makes no further changes to the 2013 Bill, and it is sent to the President for Assent, the President might be of the view that his reservations around the constitutionality of the 2013 Bill were not addressed and he might refer the 2013 Bill to the Constitutional Court of South Africa for a decision on its constitutionality. If the President does assent to the 2013 Bill, either after the NCOP makes substantial changes to the 2013 Bill or not, the 2013 Bill might still be subject to constitutional challenge.

The Mining Charter

The Mining Charter sprang from the MPRDA and also took effect on 1 May 2004. The Mining Charter committed all stakeholders in the mining industry to transfer ownership of 26 percent of their assets to black or historically disadvantaged South Africans (HDSAs) within 10 years. The Charter also sets targets for, amongst other things, the advancement of HDSAs into management positions, the employment of women, procurement of goods and services from HDSA-owned companies, training, community development and the upgrading of mine housing. Mining companies are required to devise plans to achieve these targets, must identify current levels of beneficiation and must indicate opportunities for growth.

The objectives of the Mining Charter are to:

 

promote equitable access to the nation’s Mineral Resources by all the people of South Africa;

 

substantially and meaningfully expand opportunities for HDSAs, including women, to enter the mining and minerals industry and to benefit from the exploitation of the nation’s Mineral Resources;

 

use the industry’s existing skills base for the empowerment of HDSAs;

 

expand the skills base of HDSAs in order to serve the community;

 

promote employment and advance the social and economic welfare of mining communities and the major labour-sending areas; and

 

promote beneficiation of South Africa’s mineral commodities.

The Mining Charter envisages measuring progress on transformation of ownership by:

 

taking into account, amongst other things, attributable units of production controlled by HDSAs;

 

allowing flexibility by credits or offsets, so that, for example, where HDSA participation exceeds any set target in a particular operation, the excess may be offset against shortfalls in another operation;

 

taking into account previous empowerment deals in determining credits and offsets; and

 

considering special incentives to encourage the retention by HDSAs of newly acquired equity for a reasonable period.

Under the Mining Charter, the mining industry as a whole agreed to assist HDSA companies in securing finance to fund participation in an amount of ZAR 100 billion over the first five years. Beyond the ZAR 100 billion commitment, HDSA participation was to be increased on a willing seller, willing buyer basis, at fair market value, where the mining companies are not at risk.

Following a review, the DMR amended the Mining Charter and the Revised Mining Charter was released on 13 September 2010. The requirement under the Mining Charter for mining entities to achieve a 26 percent HDSA ownership of mining assets by the year 2014 was retained. Amendments to the Mining Charter in the Revised Mining Charter require mining companies to:

 

facilitate local beneficiation of mineral commodities;

 

procure a minimum of 40 percent of capital goods, 70 percent of services and 50 percent of consumer goods from HDSA suppliers (i.e., suppliers in which a minimum of 25 percent + 1 vote of share capital is owned by HDSAs) by 2014, these targets being, however, exclusive ofnon-discretionary procurement expenditure;

 

ensure that multinational suppliers of capital goods put a minimum of 0.5 percent of their annual income generated from South African mining companies into a social development fund beginning in 2010, to contribute to the socioeconomic development of South African communities;

 

achieve a minimum of 40 percent HDSA demographic representation by 2014 at executive management (board) level, senior management (EXCO) as well as in those positions requiring core and critical skills, middle management level and junior management level;

 

invest up to five percent of annual payroll in essential skills development activities; and

 

implement measures to improve the standards of housing and living conditions for mineworkers by converting or upgrading mineworkers’ hostels into family units, attaining an occupancy rate of one person per room and facilitating home ownership options for all mineworkers in consultation with organised labour, all of which must be achieved by 30 April 2014.

 

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In addition, mining companies are required to monitor and evaluate their compliance with the Revised Mining Charter, and must submit annual compliance reports to the DMR.

The government takes a “Scorecard” approach to the different facets of promoting the objectives of the Charter. It uses the Scorecard when considering applications for the conversion of existing old order rights into new order rights. The Scorecard sets out the requirements of the Charter in tabular form which allows the DMR to “tick off” areas where a mining company is in compliance. It covers the following areas:

 

human resource development;

 

employment equity;

 

migrant labour;

 

mine community and rural development;

 

housing and living conditions;

 

ownership and joint ventures;

 

beneficiation; and

 

reporting.

The Scorecard attached to the Revised Mining Charter made provision for aphased-in approach for compliance with the above targets over the five-year period ended on 30 April 2014. For measurement purposes, the Scorecard allocated various weightings to the different elements of the Revised Mining Charter.

Failure to comply with the provisions of the Revised Mining Charter will amount to a breach of the MPRDA, may result in the cancellation or suspension of a mining company’s existing mining rights and may prevent AngloGold Ashanti’s South African operations from obtaining any new mining rights. However, AngloGold Ashanti has not yet received its “Scorecard” from the government assessing its compliance with the requirements of the Charter.

In March 2015, the Minister of Mineral Resources announced that the Department of Mineral Resources and the Chamber of Mines of South Africa had jointly agreed to submit certain matters relating to the interpretation of the Revised Mining Charter, including the qualification of certain historical BBBEE transactions (defined below) for meeting the HDSA ownership thresholds, to the courts in South Africa for determination and clarification. Papers were filed by the Chamber of Mines of South Africa and the DMR (the “DMR/Chamber of Mines application”). Separately, the law firm Malan Scholes launched an application challenging the constitutionality of the Mining Charter and the Revised Mining Charter and requesting that these Charters be set aside. The court subsequently postponed the DMR/Chamber of Mines application. Judgement on the Malan Scholes application has been reserved.

On 9 March 2016, AngloGold Ashanti received a notice from the DMR stating that the company was not compliant with the 26 percent HDSA ownership requirement. The notice directed the company to remedy thenon-compliance within 60 days. Failure to comply with the order could constitute an offence under the MPRDA and, as such, could negatively impact AGA’s “Scorecard” assessment. On 14 March 2016, AngloGold Ashanti timely responded to thenon-compliance notice. The DMR provided no further response and, consequentially, the notice has lapsed.

On 15 April 2016, the Minister of Mineral Resources published a draft mining charter (the “Draft 2016 Mining Charter”). The Draft 2016 Mining Charter seeks to align the Revised Mining Charter with the Broad-Based Black Economic Empowerment Act, 53 of 2003, in order to ensure meaningful participation of black people and provide for policy and regulatory certainty to ease the investment in and the development of the mining industry. Interested and affected parties were invited by the DMR to submit written representations on the Draft 2016 Mining Charter until 31 May 2016.

Below are the new requirements introduced by the Draft 2016 Mining Charter:

 

South African mining companies retain the minimum target of 26% ownership threshold by black people per mining right, and for as long as they hold the right, to enable meaningful economic participation of black people in the industry.

 

A minimum of 5% ownership must be allocated to each of the following groups: workers, black entrepreneurs and communities. All black participants are required to participate collectively in a special purpose vehicle.

 

Mining companies must procure 60% of capital goods, 80% of services and 70% of consumables goods from Black Economic Empowerment (“BEE”) compliant and locally based entities.

 

Multinational suppliers of capital goods must annually contribute 1% of their annual income generated from local mining companies towards the socio-economic development of local communities.

 

Locally based entities must analyse mineral samples across the mining value chain.

 

Mining companies must achieve a minimum representation of Black People in the following management positions: 50% in executive (25% of which must be black female), 60% in senior management (30% of which must be black female); 75% in middle level (38% of which must be black female); 88% in junior level (44 percent of which must be black female) and 40% in core and critical skills. In addition; Black People with disabilities must constitute 2% of all employees.

 

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The mining industry must continue to invest up to 5% of its annual payroll in skills development activities. 15% of such investment must be invested to the Ministerial Skills Development Trust Fund.

 

One percent of the annual turnover of mining companies must be contributed toward the development of local communities and areas from which a majority of mineworkers both historical and current were or are recruited.

 

All performance, investment, ownership and other targets in the Revised Mining Charter will apply throughout the life of a mine, unless the specific target specifies otherwise.

The issues such as reporting, mine and rural development are similar to the Revised Mining Charter, save for the fact that the Draft 2016 Mining Charter proposes that 1% of the annual turnover of the mining companies must be contributed towards local development and labour sending areas.

In addition, the Draft 2016 Mining Charter provides for the applicability of the Revised Mining Charter to mining entities with permits / licences granted under the Precious Metals Act, 2005 and the Diamonds Act, 1986.

All targets stipulated in the Revised Mining Charter will apply throughout the life of a mine, unless the specific target specifies otherwise.

The Draft 2016 Mining Charter gives existing holders a maximum of three years to comply with the revised targets of the Revised Mining Charter from the date of its publication. The Minister of Mineral Resources has indicated that it is the DMR’s intention to publish a final version of the Draft 2016 Mining Charter in March 2017 based on the DMR’s engagement with stakeholders in the industry and without a further formal public participation process.

The Code

Section 100(1)(b) of the MPRDA obliged the Minister to develop a code of good practice for the minerals industry. On 29 April 2009, the Minister published a Code pursuant to section 100(1)(b) of the MPRDA. The Code is a guiding document and its purpose is to set out administrative principles to enhance implementation of the Mining Charter and the MPRDA. The Code is to be read in combination with the Mining Charter and other legislation relating to measurement of socio-economic transformation in the South African mining industry. The Code does not replace the Charter nor any key legislation and laws relating to the minerals and the petroleum industry but serves as a statement of policy and principles that assists in the implementation of both the MPRDA and the Charter.

Environmental laws relating to mining and prospecting

The MPRDAA repealed the sections in the MPRDA that dealt with environmental regulation of mining and prospecting operations. This was the first step in migrating the environmental regulation provisions from the MPRDA into NEMA. NEMA was then amended by the National Environmental Management Amendment Act no. 62 of 2008 and then again by the National Environmental Management Laws Amendment Act 25 of 2014, and now includes provisions to deal with environmental regulation of mining and prospecting which provisions are administered by the Minister of Mineral Resources. In addition, The Regulations Pertaining to the Financial Provision for Prospecting, Exploration, Mining or Production Operations were published in the government gazette on 20 November 2015 under GNR 1147 Notice 39425 (New Financial Provision Regulations), and now fall under NEMA.

While the New Financial Provision Regulations are similar to the previous provisions under the MPRDA, some of the significant changes are set forth below:

 

broadening the definition of “financial provision” to require making financial provision for the adverse impacts that might arise from operations rather than only those listed in the environmental management plan (EMP), as was previously the case;

 

requiring the holder to annually assess environmental liability and adjust the financial provision to the satisfaction of the Minister of Mineral Resources;

 

requiring the holder to submit an audit report to the Minister of Mineral Resources on the adequacy of the financial provision from an independent auditor. If the Minister of Mineral Resources is not satisfied with the assessment, he is entitled to appoint his own auditor;

 

requiring that a holder maintain and retain financial provision notwithstanding the issuance of a closure certificate. Furthermore, the Minister may retain such portion of the financial provision as may be required to rehabilitate the closed mining or prospecting operation in respect of latent, residual or any other environmental impacts, including the pumping of polluted or extraneous water, for a prescribed period. This is not only in respect of holders of rights, but also now in respect of holders of old order rights and holders of works;

 

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before the coming in to effect of the New Financial Provision Regulations, holders could make financial provision for annual rehabilitation, final rehabilitation and post-closure residual impacts and water pumping by adding up the total amount for these three types of rehabilitation and making financial provision in one go using one or a mix of four methods: depositing cash in to the DMR bank account, keeping the amount in a rehabilitation trust in accordance with the Income Tax Act, 1962, obtaining a financial guarantee or a bank guarantee in respect of the amount, or using a method determined by the Director-General (this was not common in practice). Under the New Financial Provision Regulations, if the holder wishes to use a rehabilitation trust in accordance with the Income Tax Act, 1962, the amount in the trust can only relate to financial provision for post-closure residual impacts and water pumping. Holders can no longer make financial provision for annual and final closure through a trust fund;

 

a holder’s financial provision must be equal to the sum of actual costs of implementing all three broad classes of rehabilitation for at least 10 years; and

 

the financial provision liability associated with annual rehabilitation, final closure or latent or residual environmental impacts may not be deferred against assets at mine closure or mine infrastructure salvage value.

Failure to realign to the new system constitutesnon-compliance with section 24P of NEMA, which would entitle the DMR to issue a directive and failure to comply with the directive is an offence under section 49A(g) of NEMA. A person convicted of an offence under section 49A(g) of NEMA is liable to a fine not exceeding ZAR10 million or to imprisonment for a period not exceeding 10 years, or to both.

The mining industry has raised concerns with the New Financial Provision Regulations, including

 

confusion regarding the applicability of the New Financial Provision Regulations to applicants and to previous holders;

 

duplicate funding or double provisioning;

 

unclear methods and periods for determining financial provision;

 

legal barriers to use of trust funds;

 

burdensome public consultation and disclosure requirements;

 

transitional provisions and time frames:

 

requirements for an additional 3 (three) plans;

 

over-auditing – time and cost implications; and

 

inclusion of care and maintenance.

On 26 October 2016, proposed Amendments to the New Financial Provision Regulations were published for comment. The mining industry has been engaging the Department of Environmental Affairs regarding the New Financial Provision Regulations and the proposed Amendments. A revised version of the Financial Provision Regulations is expected to be published during the course of 2017, with a revised compliance deadline of February 2019.

Pursuant to section 24N(8) of NEMA, directors of a company are jointly and severally liable for any negative impact on the environment, whether advertently or inadvertently caused by the company they represent, including damage, degradation and pollution.

See also “Item 4B: Business Overview—Mine Site Rehabilitation and Closure” and “Item 4B: Business Overview—Environmental, Health and Safety Matters”.

AngloGold Ashanti’s rights and permits

A mining right will be granted to a successful applicant for a period not exceeding 30 years. Mining rights may be renewed for additional periods not exceeding 30 years at a time. A mining right can be cancelled if the mineral to which such mining right relates is not mined at an “optimal” rate.

AngloGold Ashanti holds seven mining rights in South Africa (three in West Wits and four in Vaal River) which have been successfully converted, executed and registered as new order mining rights at the Mineral and Petroleum Titles Registration Office (MPTRO).

A prospecting right will be granted to a successful applicant for a period not exceeding five years, and may only be renewed once for three years. The MPRDA also provides for a retention period of up to three years after prospecting, with one renewal up to two years, subject to certain conditions.

AngloGold Ashanti holds one prospecting right in Vaal River.

AngloGold Ashanti also holds a mining permit for the recovery of sand and clay in West Wits, which has been renewed until 22 March 2017. AngloGold Ashanti is in the process of renewing this permit.

 

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AngloGold Ashanti holds a refining licence and an import and export permit from the South African Diamond and Precious Metals Regulator.

The BBBEE Amendment Act

The President of South Africa assented to the BBBEE Amendment Act on 23 January 2014. The BBBEE Amendment Act came into effect on 24 October 2014 with the object of amending the Broad-based Black Economic Empowerment Act 53 of 2003 (BBBEE Act) to provide a framework of principles, strategies and guidelines aimed at promoting the broad-based socio-economic empowerment of HDSAs across the South African economy and society in the form of ownership, management, employment equity, skills development, preferential procurement, enterprise development and socio-economic development. The BBBEE Amendment Act includes a number of changes to the framework under the BBBEE Act, including:

 

amending and clarifying the definition of the intended beneficiaries of such framework;

 

amending the definition of “Broad-Based Black Economic Empowerment”, or BBBEE, to introduce the concept of viable BBBEE and providing standards for that preferential procurement;

 

expanding the scope of the Codes of Good Practice (BBBEE Codes), and the related transformation charters, on BBBEE matters that the Minister of Trade and Industry can issue under the BBBEE Act for specific sectors of the South African economy and making it compulsory for public authorities, governmental agencies and other public entities to apply such codes (Sector Codes);

 

introducing into the BBBEE Act itself the definition of fronting BBBEE practices, which to date has been developed outside of the BBBEE Act and has now been expanded to capture the more sophisticated and unsuspecting fronting transactions, making fronting a criminal offense that is punishable with imprisonment and fines under certain circumstances, reasserting in the BBBEE Act the common law remedies for misrepresentation and more generally enhancing the enforcement mechanism against fronting;

 

establishing a BBBEE Commission responsible for overseeing, supervising and promoting compliance with the BBBEE Act, as well as receiving and investigating BBBEE-related complaints; and

 

providing that the Department of Trade and Industry (DTI) may impose special requirements for specific industries.

Before the BBBEE Amendment Act came into effect, the BBBEE Act provided that in the event of a conflict between the BBBEE Act and any other law in force immediately prior to the commencement of the BBBEE Act, the BBBEE Act would prevail if the conflict specifically relates to a matter addressed in the BBBEE Act. The BBBEE Amendment Act inserted a new provision in the BBBEE Act whereby the BBBEE Act trumps the provisions of any other law in South Africa with which it conflicts, provided such conflicting law was in force immediately prior to the effective date of the BBBEE Amendment Act. The provision became effective as from 24 October 2016.

On 27 October 2015, the Minister for Trade and Industry published Government Notice 1047 of Government Gazette 39350, which declared an exemption in favour of the DMR from applying the requirements contained in section 10(1) of the BBBEE Act for a period of 12 months. The exemption can be read as confirmation that the DTI sees the BBBEE Codes as “applicable” to the Mining Industry after the exemption is lifted on 27 October 2016.

Additionally, the revised BBBEE Codes of Good Practice (Revised BEE Codes) became effective on 01 May 2015. Both the BBBEE Amendment Act and the Revised BEE Codes expressly stipulate that where an economic sector in South Africa has a Sector Code in place for BEE purposes, companies in that sector must comply with the Sector Code. For purposes of the BBBEE Act, the Revised Mining Charter is not a Sector Code. It is not, at this stage, clear what the interplay between the Revised Mining Charter and the BBBEE Act and Revised BEE Codes is. The government may designate the Revised Mining Charter as a Sector Code in which case it would be under the auspices of the BBBEE Act, but has not chosen to do so in its government gazette notice of 17 February 2016. Until such determination is made, if at all, the Revised Mining Charter remains a stand-alone document under the auspices of the MPRDA and may become subject to the trumping provision discussed above. This uncertainty might be resolved either by government clarification in this regard or by the matter receiving judicial attention.

The Royalty Act

The Mineral and Petroleum Resources Royalty Act, 2008, or the Royalty Act, was promulgated on 24 November 2008 and came into operation on 1 March 2010. The Royalty Act imposes a royalty on refined and unrefined minerals payable to the state.

 

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The royalty in respect of refined minerals (which include gold and silver) is calculated by dividing earnings before interest and taxes, or EBIT, as calculated under IFRS, by the product of 12.5 times gross revenue calculated as a percentage, plus an additional 0.5 percent. EBIT refers to taxable mining income (with certain exceptions such as no deduction for interest payable and foreign exchange losses) before assessed losses but after capital expenditure. A maximum royalty of five percent of revenue has been introduced for refined minerals.

The royalty in respect of unrefined minerals (which include uranium) is calculated by dividing EBIT by the product of nine times gross revenue calculated as a percentage, plus an additional 0.5 percent. A maximum royalty of 7 percent of revenue was introduced for unrefined minerals. Where unrefined Mineral Resources (such as uranium) constitute less than 10 percent in value of the total composite Mineral Resources, the royalty rate in respect of refined Mineral Resources may be used for all gross sales and a separate calculation of EBIT for each class of Mineral Resources is not required. For AngloGold Ashanti, this means that currently the company will pay a royalty based on refined Mineral Resources (as the unrefined Mineral Resources (such as uranium) for AngloGold Ashanti for 2016 constituted less than 10 percent in value of the total composite Mineral Resources). The rate of royalty tax payable for 2016 was 0.50 percent of revenue of the company’s South African operations.

The President has appointed a committee to review the current mining tax regime. The committee, which is undergoing a review not just of the mining tax regime but of the entire South African tax regime, is currently sitting. On 13 August 2015, the committee released for public comment the First Interim Report on Mining which was submitted on 01 July 2015 to the Minister of Finance. The committee has not proposed any changes to the royalty regime in this First Interim Report.

Some of the other preliminary recommendations of the committee have included the upfront capital expenditurewrite-off regime being discontinued and replaced with an accelerated capital expenditure depreciation regime, which is in parity with thewrite-off periods provided for in respect of the manufacturing (40/20/20/20) basis. Another recommendation has been to bring the taxation of newly established gold mines into line with the tax regime applicable tonon-gold mining taxpayers (in so far as possible). The committee has recommended that the so called “gold formula” be retained for existing gold mines. Given the retention of the gold formula for existing gold mines, it will be necessary to retain ring fences in mines where the gold formula subsists. With regard to the additional capital allowances available to gold mines, the committee has recommended that such allowances should be phased out so as to bring the gold mining corporate income tax regime into parity with the tax system applicable to taxpayers as a whole.

CONTINENTAL AFRICA

Democratic Republic of the Congo

The mining industry in the Democratic Republic of the Congo (DRC) is regulated primarily by the Mining Code enacted in July 2002 and its ancillary Mining Regulations, promulgated in March 2003 (DRC Mining Code). The DRC Mining Code vests the Minister of Mines with the authority to grant, refuse, suspend and terminate mineral rights, although such authority is to be exercised upon conditions set out in the Mining Code. Mineral rights may be granted in the form of exploration permits for an initial period of four years or in the form of mining permits which are granted for an initial period of 30 years. An exploration permit may, at any time before expiry, be transformed partially into a mining licence or a small-scale mining permit. Mining permits are granted upon successful completion of exploration and satisfaction of certain requirements, including approval of a feasibility study, an environmental impact study and an environmental management plan.

The holder of a mining permit is required to commence development and mine construction within three years of the award of such permit. Failure to do so may lead to forfeiture of the mining permit. A permit holder must comply with specific rules relating to, amongst others, protection of the environment, cultural heritage, health and safety, construction and infrastructure planning. Mining and exploration activities are required to be undertaken so as to affect as little as possible the interests of lawful occupants of land and surface rights holders, including their customary rights. The exercise of mineral rights by title holders which effectively deprives or interferes with the rights of occupants and surface rights holders requires payment of fair compensation by the mineral title holder.

To protect and enforce rights acquired under an exploration or mining permit, the DRC Mining Code provides, depending on the nature of a dispute or threat, administrative, judicial and national or international arbitral recourses.

The DRC Mining Code sets out taxes, charges, royalties and other fees payable to the treasury by a mining title holder in respect of its activities. It also provides for a level of fiscal stability, in that existing tax, customs, exchange and benefits applicable to the mining activities of a mining title holder are guaranteed to remain unchanged, for a period of 10 years as from the date of any amendments to the DRC Mining Code that would result in less favourable payment obligations.

 

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On 1 January 2012, a value added tax (VAT) replaced the previously applicable sales tax. The standard rate of VAT is 16 percent and is applicable to mining companies.

On 1 January 2013, a withholding tax of 14 percent became effective. The tax is applicable to service fees payable to anon-resident service provider by a resident of the DRC.

On 18 July 2012, the Convention between the Government of the Republic of South Africa and the Government of the Democratic Republic of the Congo for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (Convention) came into effect, and is applicable to:

  

withholding taxes on amounts paid or credited on or after 1 January 2013; and

  

other income taxes, levied in respect of taxable periods beginning on or after 1 January 2013.

The Convention reduces the withholding tax on dividends paid by companies resident in the DRC to companies resident in South Africa from 20 percent to five percent and on interest paid by companies resident in the DRC to companies resident in South Africa from 20 percent to 10 percent. A South African company must own at least 25 percent of a relevant DRC entity’s outstanding shares in order to take advantage of the reduced rates.

In 2012, the DRC Mines Minister announced a reform of the DRC’s mining code. The reform, which would have increased royalties payable on certain minerals, boosted the government stake in mining operations and introduced a 50 percent levy on certain profits, among other changes, was postponed in February 2016 in light of the adverse impact of the collapse in commodity prices on existing mining activities. However, should such laws be enacted in the future, these may have a material adverse impact on the company’s results of operations in the DRC.

AngloGold Ashanti holds a stake in the Kibali gold project located in north-eastern DRC. The project is operated by Randgold Resources and is owned by Randgold Resources (45 percent), AngloGold Ashanti (45 percent) and Société Minière de Kilo-Moto SA (SOKIMO) (10 percent), which latter share represents the interest of the DRC government in the Kibali gold project.

Kibali comprises 10 permits, 7 expiring in 2029 and 3 in 2030 and covering an area of 1,836 square kilometres in the Moto goldfields of the northeast DRC.

Ghana

The Constitution of Ghana as well as the Minerals and Mining Act, 2006 (Act 703) (GMM Act) provide that all minerals in Ghana in their natural state are the property of the State and title to them is vested in the President on behalf of and in trust for the people of Ghana, with rights of reconnaissance, prospecting, recovery and associated land usage being granted under licence or lease.

The grant of a mining lease by the Ghana Minister of Lands & Natural Resources (MOLNR) upon the advice of the Minerals Commission is subject to parliamentary ratification unless the mining lease falls into a class of transactions exempted by Parliament.

Control of mining companies

The Ghana MOLNR has the power to object to a person becoming or remaining a controller of a company which has been granted a mining lease if the Minister believes, on reasonable grounds, that the public interest would be prejudiced by the person concerned becoming or remaining such a controller.

Stability agreement

The GMM Act provides for stability agreements as a mechanism to guarantee certain terms and conditions, mainly fiscal, to which a company’s operations are subject for a period of 15 years. Stability agreements are subject to ratification by Parliament.

On 18 February 2004, AngloGold and the Government of Ghana agreed on the terms of a stability agreement (Ghana Stability Agreement) to govern certain aspects of the fiscal and regulatory framework under which AngloGold Ashanti would operate in Ghana following the implementation of the business combination. The Ghana Stability Agreement necessitated the amendment of the Obuasi mining lease which had been ratified by Parliament.

Under the Ghana Stability Agreement, the Government of Ghana agreed:

 

to extend the term of the mining lease relating to the Obuasi mine until 2054 on terms existing prior to the business combination;

 

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to maintain, for a period of 15 years, the royalties payable by AngloGold Ashanti with respect to its mining operations in Ghana at a rate of 3 percent per annum of the total revenue from minerals obtained by AngloGold Ashanti from such mining operations;

 

to ensure the income tax rate would be 30 percent for a period of 15 years. The agreement was amended in December 2006 to make the tax rate equal to the prevailing corporate rate for listed companies if the rate was less than 30 percent; and

 

to permit AngloGold Ashanti and any or all of its subsidiaries in Ghana to retain up to 80 percent of export proceeds in foreign currencies offshore, or if such foreign currency is held in Ghana, to guarantee the availability of such foreign currency.

The Ghana Stability Agreement also stipulates that a sale of AngloGold Ashanti’s or any of its subsidiaries’ assets located in Ghana remains subject to the Government’s approval. Furthermore, the Government retains its special rights (Golden Share) under the provisions of the GMM Act pertaining to the control of a mining company, in respect of its assets and operations in Ghana.

The Government of Ghana agreed that AngloGold Ashanti’s Ghanaian operations will not be adversely affected by any new enactments or orders, or by changes to the level of payments of any customs or other duties relating to mining operations, taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend remittance for a period of 15 years after the completion of the business combination.

Tax laws

In March 2012 the tax laws of Ghana were amended. Changes to the tax laws included:

 

An increase in the income tax rate applicable to mining businesses from 25 percent to 35 percent. AngloGold Ashanti is currently protected until 2019 from any increase of its income tax rate to greater than the rate provided for under the Ghana Stability Agreement.

 

Introduction of a new capital allowance regime for class 3 assets (which include mineral and petroleum exploration and production rights, buildings, structures and works of a permanent nature used in mineral and petroleum exploration and production and plant and machinery used in mining and petroleum operations) that provides for a 20 percent straight line rate for a period of five years. Pursuant to the Ghana Stability Agreement, this change will not affect AngloGold Ashanti until 2019.

 

Elimination of the five percent allowance on prior year additions. Prior to the 2012 amendment, the tax code granted an additional five percent of the value of assets acquired and qualified to be classified as class 3 assets for the purpose of granting capital allowances. Capital allowance is now 20 percent each year on the total value of the assets. Pursuant to the Ghana Stability Agreement, this change will not affect AngloGold Ashanti until 2019.

 

A ring fencing rule to prevent mining businesses from deducting or setting off costs from one mining area with another’s income. Pursuant to the Ghana Stability Agreement, this change will not affect AngloGold Ashanti until 2019.

Golden Share

Under the Stability Agreement, the Government of Ghana (Government) has confirmed and agreed that the Government’s rights with respect to the Golden Share apply only in respect of AngloGold Ashanti’s assets and operations in Ghana. The rights do not extend to any other assets or operations of AngloGold Ashanti outside Ghana, nor to any assets or operations of AngloGold Ashanti.

The Government has also agreed to waive any right it may have under Section 60(I) of the Minerals and Mining Law, 1986, as amended to acquire a special share in AngloGold Ashanti or any of its direct or indirect subsidiaries or joint ventures.

The Golden Share may only be held by or transferred to a Minister of the Government or any person acting on behalf of such Government and authorised in writing by such Minister.

The following matters require, and will not be effective without, the written consent of the holder of the Golden Share:

 

(i)

any amendment to or removal of the relevant provisions of the AngloGold Ashanti (Ghana) Limited Regulations setting out the rights and restrictions attaching to the Golden Share;

(ii)

the voluntarywinding-up or voluntary liquidation of AngloGold Ashanti (Ghana) Limited;

(iii)

the redemption of or purchase by AngloGold Ashanti of the Golden Share;

 

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(iv)

the disposal of any mining lease held by AngloGold Ashanti (Ghana) Limited or any subsidiary of AngloGold Ashanti (Ghana) Limited; and

(v)

any disposal by AngloGold Ashanti (Ghana) Limited (other than any disposal in the ordinary course of business of AngloGold Ashanti) which, alone or when aggregated with any disposal or disposals forming part of, or connected with, the same or a connected transaction, constitutes a disposal of the whole or a material part of the assets of the AngloGold Ashanti group taken as a whole. For this purpose, a part of the AngloGold Ashanti group’s assets will be considered material if either (a) its book value (calculated by reference to the then latest audited consolidated accounts), or the total consideration to be received on its disposal, is not less than 25 percent of the book value of the net assets of the AngloGold Ashanti group or (b) the average profits attributable to it represent at least 25 percent of the average profits of the AngloGold Ashanti group for the last three years for which audited accounts are available (before deducting all charges, except taxation and extraordinary items).

Upon a return of assets in awinding-up or liquidation of AngloGold Ashanti (Ghana) Limited, the holder of the Golden Share is entitled to the sum of 0.10 cedis in priority to any payment to other members, but the Golden Share confers no further right to participate in the profits or assets of AngloGold Ashanti. The Golden Share carries no right to any dividend or any right to participate in any offer of securities to existing shareholders or in any capitalisation issue.

The holder of the Golden Share may require AngloGold Ashanti (Ghana) Limited to redeem the Golden Share at any time in consideration of the payment to such holder of 0.10 cedis.

VAT

In December 2013, the Parliament of Ghana (Parliament) passed an amendment to the Internal Revenue Act, 2000 (Act 592) known as the Internal Revenue (Amendment) (No. 2) Act 2013, (Act 871). This, amongst other changes, increased the withholding tax for goods and services supplied bynon-residents, payments tonon-resident individuals and payment for management and technical services from 15 percent to 20 percent. A new Value Added Tax Act, (VAT) 2013 (Act 870) imposes a 15 percent VAT payable on goods and services. The National Health Insurance Act 2012 (Act 852) also imposes a 2.5 percent VAT payable on goods and services. The total VAT payable on goods and services is therefore 17.5 percent. The Value Added Tax 2013, (Act 870) extended the coverage of the tax to some business activities which were hitherto outside the tax net. These included the supply of financial services that are rendered for a fee, commission or a similar charge and the manufacture or supply of pharmaceuticals. The implementation of the charging of VAT in relation to these two services has however been suspended until further notice. These taxes do not have an adverse effect on the Company since they do not directly impact its operations.

Income taxes

In November 2015, Parliament passed the Income Tax Act, 2015 (Act 896) (ITA) which repealed the Internal Revenue Act, 2000, (Act 592), as amended. The ITA became effective from 1 January 2016 for the 2016 year of assessment. The ITA ring fences and taxes income derived from mining operations at the rate of 35 percent. For the purpose of ascertaining the income of a person for taxation, each separate mineral operation is treated as independent business and taxed accordingly. Pursuant to section 2.06 of the Stability Agreement, the ring fencing provision will not apply to AngloGold Ashanti until 2019 and until then the company’s tax exposure will not exceed 30 percent.

The ITA provides for the carrying forward of losses for up to five years. Losses carried forward can only be used in the order in which they were generated or incurred. The ITA further provides that capital allowances calculated or granted shall be taken in that year and shall not be deferred.

The ITA states that expenditure incurred in the course of reconnaissance or prospecting operations shall be placed in a single pool, and the balance in that pool is to be carried forward year to year until commencement of production. When production commences, the amount in the pool must be capitalised and the Commissioner-General of the Ghana Revenue Authority shall grant a capital allowance in respect thereof. The ITA also provides guidance on how costs incurred during the reconnaissance and exploration phase of a mine ought to be treated.

The ITA imposes a withholding tax on dividends paid by a person conducting mineral operations in Ghana at eight percent. This is regardless of the amount of shareholding a shareholder or shareholders may have in the entity paying the dividend. Under section 59 (3) of the ITA, an exemption from tax exists where the recipient of the dividend holds or controls directly or indirectly at least 25 percent of the voting power of the company paying the dividend.

 

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The ITA also introduces some variation in the rates of withholding taxes. For example payments for the supply of services (Payments with a Source in Ghana to Persons Other Than Individuals) has been increased from 5 percent to 15 percent; the withholding tax on resident Directors’ remuneration has been increased from 10 percent to 20 percent; and withholding taxes on natural resource payments and royalties have been increased from 10 percent to 15 percent. This may have an indirect impact on AngloGold Ashanti’s operations as this rate will have a material impact on the margins of suppliers and possibly their working capital. Suppliers may therefore seek to pass this on to AngloGold Ashanti by increasing their fees and charges.

The ITA also abolishes the flat 15 percent rate of tax on capital gains. Capital gains are now to be included in business or investment income and taxed at the applicable income tax rate which, for persons engaged in mineral operations, is 35 percent.

Various amendments were made to the ITA as follows:

 

Income Tax (Amendment) Act, 2015 (Act 902) to provide for new rates of tax on the chargeable income of resident individuals for a year of assessment, introducing the withholding tax rate applicable to fees payable to an individual for services considered as “any other supply of services” and increases the monetary threshold for an individual to whom a presumptive tax applies and for related matters.

 

Income Tax (Amendment) Act 2016 (Act 907) to remove the 1% tax on interests earned by investors, and also reduce withholding tax on services from 15% to 7.5% under the ITA.

The Income Tax Regulations L.I. 2244 pursuant to the provisions of the ITA was also introduced to reduce the income tax imposed on the wages of casual and temporary workers from the previous rate of7.5%-15% to a fixed rate of 5%.

Retention of foreign earnings

AngloGold Ashanti’s operations in Ghana are permitted to retain 80 percent of their foreign exchange earnings in an offshore foreign exchange account. In addition, the company has permission from the Bank of Ghana to retain and use US dollars, outside of Ghana, to fulfill payment obligations to the company’s hedge counterparties which cannot be met from the cash resources of its treasury company. On 4 February 2014, the Bank of Ghana issued new directives as part of measures to streamline the collection and repatriation of export proceeds to Ghana. These directives included an instruction to all banks and authorised dealers to, within five working days of receipt of export proceeds, convert the proceeds into Ghana cedis based on the average Interbank Foreign Exchange Rate prevailing on the day of conversion with a spread not exceeding 200 percentage in points (pips). Exporters with retention accounts were to continue to operate these accounts in accordance with their retention agreements. Retention proceeds which were sold to the banks were to be converted into Ghana cedis based on the average Interbank Foreign Exchange Rate prevailing on the day of conversion with a spread not exceeding 200 pips. It further advised that offshore foreign exchange transactions by resident companies, including exporters, were strictly prohibited and exporters were to ensure that all export proceeds are repatriated in full. Failure to comply with the provisions attracts penalties including pecuniary sanctions, jail terms, suspension and revocation of the operating licence as applicable.

Following engagement with relevant stakeholders, the Bank of Ghana issued another notice clarifying that the transfer of foreign exchange to meet external payment obligations remains permissible for transactions such as:

 

redemptions and coupon payments on Bonds held bynon-residents;

 

investment income, technology and management transfer entitlements, expatriate emoluments, and other incentive packages and overseas commitments under provisions in various legislation and legislative instruments such as the GMM Act, and the Technology Transfer Regulations ( L.I.1547 ); and

 

other outward payments for imports of goods and services.

The notice also stated that all balances in Foreign Currency Accounts (FCAs) and Foreign Exchange Accounts (FEAs) will continue to be held in foreign currency, and will not be converted into Ghana Cedis. External transfers of up to $10,000 per annum without documentation from FEA and FCA are still permitted. Balances held in FEAs and FCAs continue to remain available for all legitimate external transactions.

The Bank of Ghana on 9 August 2014 further revised the rules on foreign exchange operations, effectively reversing the initial directives controlling transactions in foreign exchange. The details are as follows:

 

The limit of $1000.00 onover-the-counter foreign exchange cash withdrawal is removed.

 

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Exporters shall continue to repatriate in full export proceeds in accordance with the terms agreed between the trading parties. Such proceeds shall be credited to their FEAs and converted on a need basis.

 

FEAs and FCAs will continue to be opened and operated as they were before the Notices of February 4, 2014.

 

Except for transfers from FEA to FCA which are still prohibited, all other transfers between accounts are permitted.

 

For the avoidance of doubt:

  

FCAs shall be fed only with unrequited transfers such as transfers from abroad for investment or embassy transfers.

  

FEAs shall be fed with foreign exchange generated from activities in Ghana such as proceeds from exports of goods and services.

  

The threshold for transfers abroad without initial documentation remains at $50,000.00. Where documentation in respect of a transfer remains outstanding, any subsequent import transaction by an importer, irrespective of value, shall only be made on prior provision of documentation required for the current import transaction.

  

Importers who usenon-cash instruments (plastic cards) may continue to load up to $50,000 to meet their legitimate needs abroad subject to the necessary documentation requirements.

  

Foreign currency denominated loans may be granted by resident banks to their customers subject to their own internal procedures and processes and in compliance with the risk management guidelines of the Bank of Ghana.

  

Cheques and cheque books may be issued by banks to holders of FEAs and FCAs.

The Bank of Ghana reiterated that the Ghana cedi remains the sole legal tender in Ghana. Therefore, pricing, advertising, invoicing, receiving, and making payments for goods and services should be done in Ghana cedis, unless otherwise authorized by the Bank of Ghana.

Existing measures that were not amended by this Notice continue to remain in force.

AngloGold Ashanti maintains and operates its FCA, FEA and Retention Accounts in compliance with the directives.

Localisation policy

Mining companies must submit a detailed programme for the recruitment and training of Ghanaians with a view to achieving “localisation”, which is the replacement of expatriate personnel in a company’s Ghanaian operations by Ghanaian personnel. In addition, mining companies must give preference to Ghanaian products and personnel, to the maximum extent possible, consistent with safety, efficiency and economies. Recently passed Minerals and Mining (General) Regulations, 2012 (L.I. 2173) give further details on the localisation policy.

Except as otherwise provided in a specific mining lease, all immovable assets of the holder of the mining lease vest in the State upon termination, as does all moveable property that is fully depreciated for tax purposes. Moveable property that is not fully depreciated is to be offered to the state at the depreciated cost. The holder must exercise his rights subject to such limitations relating to surface rights as the Minister of Mines may prescribe.

Ground rent

In 2012, the Ghanaian Parliament passed the Fees and Charges Amendment Legislation 2012 (Ll 2191), which fixed mineral concession rent at Gh¢9,016 per square kilometre per annum as opposed to the previous rate of Gh¢0.50 per acre per annum. However, on 19 March 2014, the Office of the Administrator of Stool Lands informed the Ministry of Finance in writing that it has agreed with the Ghana Chamber of Mines to revise the fees to Gh¢15.0 per acre per annum. The Chamber has since 2 September 2014 instructed all mining companies to pay the agreed sum. The Fees and Charges (Amendment) Instrument 2015 (LI 2208), was passed by Parliament on December 23, 2015, which, among other things, fixes the payment of ground rent by mining companies at Gh¢15 per acre per annum. The company has since paid the agreed ground rent for its Binsere Leases but paid $36 per km2 for the Obuasi lease as specifically provided for in the lease. The company also indicated to the Office of the Administrator of Stool Lands that by virtue of the Ghana Stability Agreement, the company is protected from the increase in the ground rent for the duration of the Stability Agreement, and that the company’s payment of same cannot be deemed as a waiver of its rights under the Stability Agreement.

National Fiscal Stabilisation (Amendment) Act, 2014 (Act 882)

The National Fiscal Stabilisation (Amendment) Act has extended the application of the National Fiscal Stabilisation Levy to net profits before tax up to and including the 2017 year of assessment. In the past, AngloGold Ashanti has sought protection under the Stability Agreement and this has been granted. AngloGold Ashanti will therefore continue seeking the protection.

Special Import Levy Act, 2014 (Act 884)

The Special Import Levy Act has extended the application of the National Fiscal Stabilisation Levy to profits before tax up to and including the 2017 year of assessment.

 

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Customs and Excise (Petroleum Taxes and Petroleum Related Levies) (Amendment) Act, 2014 (Act 886)

The Customs and Excise (Petroleum Taxes and Petroleum Related Levies) (Amendment) Act reversed the excise tax on petroleum products (petroleum, gas oil, residual fuel oil, unified gasoline, kerosene, liquefied petroleum gas and local marine gas) from ad valorem to specific tax.

Customs (Amendment) Act, 2015 (Act 905)

Following the passage of the Customs (Amendment) Act, 2015 (Act 905), by the Ghana Revenue Authority, the ECOWAS Regional Common External Tariff (CET) came into effect on 1 February 2016. It replaces the Harmonised Systems: Common External Tariff and Other Schedules. The CET is one of the instruments of harmonising ECOWAS Member States and strengthening its Common Market.

Energy Sector Levies Act, 2015 (Act 899)

The Energy Sector Levies Act, which received assent on 24 December 2015, consolidates existing energy sector levies and imposes a new levy, the Price Stabilization and Recovery Levy. The Price Stabilization and Recovery Levy, which is to be collected by the National Petroleum Authority and paid into the Price Stabilisation and Recoveries Account, applies to petrol at a rate of 12 Ghana pesewas per litre, to diesel at a rate of 10 Ghana pesewas per litre, and to liquefied petroleum gas at a rate of 10 Ghana pesewas per kilogram.

Minerals and Mining (Amendment) Act 2015 (Act 900)

A Minerals and Mining (Amendment) Act was passed by Parliament and assented to by the President on 16 December 2015. It replaces the existing royalty provisions introduced by the Minerals and Mining Amendment Act, 2010 (Act 794) pursuant to which the rate of royalties was fixed by an Act of Parliament. Under the new regime, the Minister will prescribe the rate payable and the manner of payment by passing a Legislative Instrument or other subsidiary legislation. The existing royalty rate of five percent however remains the same until such time as the rate is altered in the manner prescribed. The Minerals and Mining (Amendment) Act 2015 also makes provision for the confiscation of the equipment of illegal miners.

Minerals Development Fund Act 2016 (Act 912)

Parliament has passed the Minerals Development Fund Act, 2016 (Act 912). The purpose of the law is to establish a Minerals Development Fund (MDF) to address the development challenges affecting mining communities by setting aside 20 percent of mineral royalties received by the government for development projects. The MDF is to provide financial resources for the direct benefit of communities within mining areas. The law introduces the Mining Community Development Scheme to directly sponsor socio-economic development in communities in which mining operations take place or which are affected by mining activities.

Mining & Environmental Guidelines

In June 2014, the Ghana Environmental Protection Agency and the Minerals Commission circulated draft Mining and Environmental Guidelines to all mining companies for comment. The guidelines concern environmental management, reclamation, closure requirements and the proposed Mining Community Development Scheme. The Mining Community Development Scheme has since been established pursuant to the Minerals Development Fund Act 2016 (Act 912), discussed above.

Rules regarding the export of gold and diamonds

The Bank of Ghana introduced new measures to regulate and monitor the export of gold and diamonds from Ghana. From 15 September 2015, all exports of gold and diamonds must be carried out through the Precious Minerals Marketing Company, except where the exporter is the holder of a licence that permits it to export directly, and the Ghana Revenue Authority (Customs Division) only permits gold to be exported by a licensed gold exporter who has a completed Form FEX A4 bearing Bank of Ghana’s embossment. The export measures do not apply to AngloGold Ashanti because the company holds a licence granted by the Minister for Lands and Natural Resources to sell and export its production.

The Bank of Ghana issued a notice on (Notice No. BG/GOV/SEC/2016/02) which, among other things, now allows mining companies to sell the portion of foreign exchange receipts from export that was earmarked for surrender to the Bank of Ghana directly to the commercial banks.

 

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In November 2016 the Ministry of Lands and Natural Resources issued a ministerial directive appointing the Precious Minerals Marketing Company Ltd (PMMC) as designated laboratory for assaying in Ghana. The directive requests all persons holding export licenses for gold to submit all gold to be exported to the PMMC for assay before export. Mining businesses, including AngloGold Ashanti, acting through the Ghana Chamber of Mines are opposed to this and the Chamber has initiated measures to get the directive reversed or modified due to its potential negative impact on mining companies in the region.

Budget Statements

In the November 2014 Budget Statement, a Special Petroleum Tax of 17.5 percent was proposed as part of a rationalisation of the VAT regime and change in the petroleum pricing structure.

Mining properties

The company is required to pay ground rent to the Government of Ghana and such other fees as are prescribed by legislation, including royalties on timber felled within the lease area.

Obuasi

The current mining lease for the Obuasi area was granted by the Government of Ghana on 5 March 1994. It grants mining concessions to land with an area of approximately 338 square kilometres in the Amansie East and Adansi West districts of the Ashanti region for a term of 30 years from the date of the agreement. In addition, a mining lease over an adjacent 140 square kilometres was also granted, resulting in the total area under the mining lease increasing to 474 square kilometres.

The Government of Ghana agreed to extend the term of the mining lease relating to the Obuasi mine until 2054. The mining lease was formally ratified by Parliament on 23 October 2008.

On 3 March 2016, the Minerals Commission approved AngloGold Ashanti Ghana’s application to surrender approximately 273.54 square kilometres of the area to the Government of Ghana, reducing the lease areas to 201.46 square kilometres. The remaining parcel of land that will be subject to the mining lease is situated within various villages and townships in the region, but excludes the municipality of Obuasi.

Iduapriem

Iduapriem has title to a 31 square kilometre mining lease granted on 19 April 1989 for a period of 30 years. In January 2009 Iduapriem obtained a new mining lease, the Ajopa Concession, for a period of 10 years. The concession covers an area of 48.34 square kilometres. In December 2011 the Minister of Lands and Natural Resources gave his consent for Teberebie’s title to a 25.83 square kilometre mining lease, granted in June 1992 for a period of 30 years, to be assigned to Iduapriem. While ownership of the lease has passed to Iduapriem, the registration of the transfer of the lease is still in process.

Guinea

In Guinea, all mineral substances are the property of the State. Mining activities are regulated by law L/2011/006/CNT dated 9 September 2011 as amended by law L/2013/053/CNT dated 8 April 2013 and promulgated by decree D/2013/075/PRG/SGG dated 17 April 2013 (together, the Mining Code).

The Mining Code is accompanied and implemented by various implementation decrees. To date, various decrees have been adopted, including decree D/2014/015/PRG/SGG adopting a model of mining convention, dated 17 January 2014, order A/2016/1584/MMG/SGG related to the administration’s capacities for the management of integrated mining projects(PARCA-GPI) and its steering committee, dated 6 June 2016, decree D/2016/163/PRG/SGG on the national agency for the development of mining infrastructures (ANAIM), dated 13 June 2016, and decree D/2016/215/PRG/SRG on the appointment of executives to the Ministry of Mines and Geology, dated 8 July 2016.

The right to undertake mining operations can only be acquired by virtue of one of the following mining titles: surveying permit, small-scale mining licence, exploration licence, mining licence or mining concession.

 

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The group’s Guinea subsidiary, Société AngloGold Ashanti de Guinée SA (SAG), has title to the Siguiri mine in the form of a mining concession, granted by virtue of Presidential Decree D/97/171/PRG/SGG dated 4 August 1997, for a period of 25 years (the Mining Concession). The Mining Concession was originally covered by a mining convention entered into with the Republic of Guinea on 11 November 1993 (the Convention de Base) and amended in 2005. The Convention de Base provided for an initial duration of 25 years and would have expired in 2018.

The Mining Code, which came into force after the conclusion of the Mining Convention, confirms the validity of mining titles previously issued. The Mining Code also provides that for holders of validly signed and ratified mining conventions, the application of the Mining Code will take place by way of amendments to the relevant mining convention (in the case of SAG, the Convention de Base), which amendments are to be negotiated between the mining convention holder and the State.

On 28 June 2016, SAG and the Government of Guinea concluded a revised and consolidated convention de base (the Revised Convention de Base) which encompasses a renewal of the term of the original Convention de Base and other amendment necessary to support an expansion project proposed to extend the life of the Siguiri mine (the Expansion).

In compliance with the provisions of the Mining Code, the Revised Convention de Base was ratified by the Guinean National Assembly (law L/2016/N°067/AN dated 30 December 2016, promulgated by decree D/2017/015/PRG/SGG dated 24 January 2017), submitted to the Guinean Supreme Court which rendered a favourable opinion (judgment N°AC 005 dated 16 January 2017), and ratified by the President of the Republic (decree D/2017/021/PRG/SGG dated 24 January 2017).

As a consequence, as and from 24 January 2017, the Revised Convention de Base has cancelled and replaced the original Convention de Base, and governs the operations at the Siguiri mine and under the Mining Concession.

Key elements of the Revised Convention de Base include the following:

 

a duration of 25 years, expiring 23 January 2042, subject to further renewal if mining operations continue at that time; and with the term of the Mining Concession being aligned with the term of the Revised Convention de Base such that the Mining Concession will be renewed as long as the Revised Convention de Base remains in force;

 

SAG’s operations remain governed by the 1995 Mining Code and are only subject to the provisions of the Mining Code to the extent they are expressly set out in the Revised Convention de Base;

 

the stability of the customs and tax regime is guaranteed for the entire initial term of the Revised Convention de Base, and subject to certain condition being met, any renewal period(s);

 

the Republic of Guinea holds a 15 percentfree-carried/non-contributory interest;

 

the Republic of Guinea is entitled to a royalty on gold of 5% based on a spot gold price as per LBMA fixing (PM) up until the date of steady state commercial production of the first phase of the Expansion, after which the royalty rate applicable to gold will vary depending on threshold prices as per LBMA fixing (PM), namely: 3% if the gold price is USD 1,300 or less, 5%, if above USD 1,300 and up to USD 2,000 and 7% if above USD 2,000;

 

SAG will enjoy a 5 year income tax holiday as and from the beginning of steady state commercial production of the first phase of the Expansion, after which the income tax rate is set at 30%;

 

a local development tax of 0.4 percent is payable on the sale price for gold and silver received by SAG up until 31 December 2027, after which it will be increased to 0.6 percent;

 

salaries of expatriate employees are subject to a 10 percent income tax;

 

goods imported into Guinea for purposes related to the construction and commissioning of the first phase of the Expansion are exempt from all customs taxes and duties; and

 

SAG is committed to adopting and progressively implementing a plan for the effective rehabilitation of the mining areas disturbed or affected by its operations.

The Mining Concession covers an area divided into four blocks and totalling 1,495 square kilometres. SAG has the exclusive right to explore and mine in any part of the concession area for the duration of the period of the Revised Convention de Base. The Revised Convention de Base also grants SAG with the option to secure certain land rights over additional areas currently covered by exploration permits, but to which SAG may need access for purposes of establishing roads or storage of tailings.

The Revised Convention de Base is subject to early termination if the parties formally and expressly agree to it, if the last of the mining title held by SAG expires or is relinquished without any renewal application having been filed, if all project activities are voluntarily suspended for a continuous period of twelve months or are permanently abandoned by SAG; or if SAG goes into voluntary liquidation or is placed into liquidation by a court of competent jurisdiction.

 

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Mali

Mineral rights in Mali are governed by lawn°2010-015 dated 27 February 2012 bearing Malian Mining Code (New Mining Code), replacing ordinance No.99-32/P-RM of 19 August 1999 enacting the previous mining code, as amended by ordinancen°013/2000/P-RM of 10 February 2000 and ratified by lawn°00-011 of 30 May 2000 (1999 Mining Code), and DecreeNo. 99-255/P-RM of 15 September 1999 implementing the Mining Code.

Due to stabilisation clauses in the agreement defining the mining rights and obligations of AngloGold Ashanti entities in Mali (further described below), the mining operations carried out by the AngloGold Ashanti entities in Mali are subject to the provisions of the previous mining codes of 1970 and 1991 but also, for residual matters, expressly subject to the provisions of the 1999 Mining Code (see “Applicable mining regime” below). As a consequence the New Mining Code does not apply to the relevant mining operations.

Applicable mining regime

Prospecting activities are carried out under prospecting authorisations (autorisation de prospection). The authorisations give an individual or corporate entity the exclusive right to carry out prospecting activities over a given area for a period of three years renewable without a reduction in the area covered by the authorisation. Exploration activities may be carried out under exploration permits (permis de recherche). The latter are granted to corporate entities only by order of the Minister of Mines. Exploration permits are granted for a period of three years, renewable twice for additional three-year periods. Each renewal requires the permit holder to relinquish 50 percent of the area covered by such permit. The entity applying for such a permit must provide proof of technical and financial capabilities.

An exploitation permit (permis d’exploitation) is required to mine a deposit located within the area of a prospecting authorisation or an exploration permit. The exploitation permit grants an exclusive right to prospect, explore and exploit the named substances for a maximum period of 30 years renewable three times for an additional 10 years. The exploitation permit is granted only to the holder of an exploration permit or of a prospecting authorisation and covers only the area governed by the exploration permit or the prospecting authorisation. An application must be submitted to the Minister of Mines and to the National Director of Mines.

As soon as the exploitation permit is granted, the permit holder must incorporate a company under the law of Mali. The permit holder will assign the permit for free to this company. The State will have a 10 percent free carried interest in the company. This interest will be converted into priority shares and the State’s participation will not be diluted in case of an increase in capital.

Applications for exploitation permits must contain various documents attesting to the financial and technical capacity of the applicant, a detailed environmental study in respect of the impact of the project on the environment, a feasibility study and a bank deposit. The permit is granted by decree of the Head of Government. Refusal to grant a permit may only be based on two grounds: insufficient evidence to support the exploitation of the deposit or the failure of the environmental study.

Applications for prospecting authorisations and exploration permits must contain various documents attesting to the financial and technical capacity of the applicant, a detailed works and costs programme, a map defining the area which is being requested and providing geographical coordinates, the exact details relating to the identity of the applicant and evidence of the authority of the signatory of the application. Such titles are granted by ministerial order. Any refusal to grant such titles shall be notified by letter from the Minister of Mines to the applicant.

All mining titles mentioned above require an establishment convention (convention d’établissement) to be signed by the State and the titleholder defining their rights and obligations. A standard form of such establishment convention has been approved by decree of the Head of Government.

AngloGold Ashanti has interests in Morila, Sadiola and Yatela, all of which are governed by establishment conventions covering exploration, mining, treatment and marketing in a comprehensive document. These documents include general provisions regarding exploration (work programme, fiscal and customs framework) and exploitation (formation of a local limited liability mining company, State interest, fiscal and customs framework governing construction and exploitation phases, exchange controls, marketing of the product, accounting regime, training programmes for local labour, protection of the environment, reclamation, safety, hygiene and dispute settlement).

AngloGold Ashanti has complied with all applicable requirements and the relevant permits have been issued. Morila, Sadiola and Yatela have30-year permits which expire in 2029, 2024 and 2030 respectively. Morila’s Exploitation Permit covers approximately 200 square kilometres and was issued on 4 August 1999. Sadiola’s prospecting and exploitation agreement covers approximately 303 square kilometres and was originally entered into on 5 April 1990. Yatela is implementing a closure plan in order to relinquish the property.

 

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Tanzania

Mineral rights

Mineral rights in the United Republic of Tanzania are principally governed by the Mining Act of 2010 (Tanzania Mining Act), and the Mining Regulations, 2010 (Tanzania Mining Regulations), which include: Mining (Mineral Rights) Regulations 2010; Mining (Environmental Protection For Small Scale Mining) Regulations 2010; Mining (Mineral Beneficiation) Regulations 2010; Mining (Mineral Trading) Regulations 2010; Mining (Safety, Occupational Health and Environmental Protection) Regulations 2010; and the Mining (Radioactive Mineral) Regulations 2010.

The Tanzania Mining Act and the Tanzania Mining Regulations came into force in November 2010. Ownership of and control over minerals on, in or under the land vest in the President of the United Republic of Tanzania. No person is allowed to prospect for minerals or carry on mining operations except pursuant to the authority of a mineral right licence granted, or deemed to have been granted, under the Tanzania Mining Act or its predecessor acts.

To enable a company to prospect or mine, the Ministry of Energy and Minerals (MEM) initially grants an exclusive prospecting licence. Upon presentation of a feasibility study, together with certain other environmental, social and financial assurances, the MEM may then grant a form of licence for mining. Licensing decisions take into account the abilities of the company (including its mining, financial and technical capabilities), projected rehabilitation programmes, environmental compliance and the payment of royalties.

The following licences can be applied for under the Tanzania Mining Act:

Licences for Exploration:

 

prospecting licence;

 

gemstone prospecting licence; and

 

retention licence.

Licences for Mining:

 

special mining licence (if the proposed capital investment is equal to at least US$100 million);

 

mining licence (if the proposed capital investment is equal to between $100,000 and $100 million); and

 

primary mining licence (reserved for Tanzanian citizens).

Licences for Ancillary Activities:

 

processing licence;

 

smelting licence; and

 

refining licence.

For purposes of AngloGold Ashanti’s Geita Gold Mine, only prospecting, retention and special mining licences are relevant.

A prospecting licence grants the holder the exclusive right to prospect in the area covered by the licence for all minerals within the class of minerals applied for. The classes that can be applied for include (amongst others):

 

metallic minerals;

 

energy minerals;

 

gemstones other than kimberlitic diamonds; and

 

kimberlitic diamonds.

An application for a prospecting licence is made to the Commissioner for Minerals and the licence is valid for a period of four years. After the initial term, the licence is renewable for three further periods – the first period being for three years and the second and third periods being for two years each. Upon each renewal, 50 percent of the area covered by the licence must be relinquished. A company applying for a prospecting licence must, amongst other things, state the financial and technical resources available to it.

If the holder of a prospecting licence has identified a mineral deposit within the prospecting area that is potentially of commercial significance but that cannot be developed immediately because of technical constraints, adverse market conditions or other economic factors of a temporary character, it can apply for a retention licence. A retention licence can also be requested from the Minister after the expiry of a prospecting licence period, for reasons ranging from financial to technical considerations. A retention licence is valid for a period not exceeding five years and is thereafter renewable for a single period of five years. The advantage of converting a prospecting licence into a retention licence is that the MEM may not revoke a retention licence if the licence holder fails to meet its obligations within the time frame agreed on application for the licence (as would be the case with a prospecting licence).

 

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Holders of prospecting or retention licences over a tenement will not automatically have first right to any mining licence granted over that tenement. However, in practice, they will be best positioned to meet the requirements to be granted a form of licence for mining. The holder of a retention licence may also apply for a special mining licence for the area under the retention licence while the retention licence subsists.

Mining is mainly carried out through either a mining licence or a special mining licence, both of which confer on their holder the exclusive right to conduct mining operations in or on the area covered by the licence. A special mining licence is granted for the shorter of either the estimated life of the ore body indicated in the feasibility study report or such period as the applicant may request. It is renewable for a further period not exceeding the estimated life of the remaining ore body.

Except in the case of a special mining licence, a mineral right may be freely transferred by its holder (in whole or in part) to another person or entity without requiring consent from the MEM. However, the Commissioner for Minerals must be notified of any transfer of a prospecting or retention licence and will refuse to register the transfer unless the transferee proves that it meets the financial and technical capability criteria required to apply for such licences. The assignment of a special mining licence generally requires the prior consent of the MEM, such consent not to be unreasonably withheld or delayed. There are limited exceptions to the requirement for the Minister’s consent (such as transfers to an affiliate company of the licence holder or to a financial institution or bank as security for any loan or guarantee in respect of mining operations).

Special mining licences have certain fiscal and other advantages over mining licences, as the holder of a special mining licence may enter into a mining development agreement with the government of Tanzania to guarantee the fiscal stability of a long-term mining project and make special provision for the payment of royalties, taxes, fees and other fiscal imposts and a special mining licence holder may, in certain circumstances, unilaterally amend the programme of the mining operations agreed with the MEM.

AngloGold Ashanti has concluded a development agreement with the Ministry and was issued a special mining licence covering approximately 196 square kilometres for a period of 25 years, which expires on 26 August 2024.

On 9 October 2014 an addendum to the development agreement was entered into ratifying the following changes:

 

An increase in the royalty rate from three percent to four percent with effect from 1 May 2012;

 

With effect from the financial year 2015, the capital allowance applicable to the unredeemed qualifying capital expenditure (15 percent per annum) referred to in section 18(a) of the Income Tax Act No 33 of 1973 shall no longer apply; and

 

With effect from 1 July 2014, Geita Gold Mining Limited is liable to pay the Geita District Council Levy at a rate of 0.3 percent on turnover (no longer capped at US$200,000 per annum).

The Fiscal Regime

The Finance Act, 2015 which was assented to on 28 June 2015 and came into force on 1 July 2015 contains a provision for a 30 percent capital gains tax on the sale of shares by anoff-shore parent company. This provision was introduced by the Finance Act, 2012 and in this legislation, additional changes were also made to the procedure for payment of capital gains tax by the seller of shares. Tax at the rate of 30 percent is payable by way of an initial instalment of 20 percent on the transfer, based on the notional gain that the seller would make after a further instalment of the remaining 10 percent is due.

The Value Added Tax Act, 2014 (the VAT Act) which came into force on 1 July 2015 restricts VAT relief on purchases made by mining companies. The VAT Act is specific in that it provides that no purchase by companies is exempt or zero rated unless specified by the law. Previously mining companies were entitled to 100 percent VAT relief.

Local Government Levies

As mentioned above, following the signature of the addendum to the development agreement Geita Gold Mine is required to pay local government a service levy of 0.3 percent of its gross annual turnover in line with the Local Government Finance Act No.9 of 1982.

Regulatory changes

The Mining (Minimum Shareholding and Public Offering) Regulations, 2016 came into force by Government Notice No. 286 published on 7 October 2016 and revised by amendment on 24 February 2017.

The regulations set out the requirement to sell shares to Tanzanian nationals, by way of a public offering and listing on the Dar es Salaam Stock Exchange, which will apply to companies that are carrying out large scale mining operations.

 

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The regulations also require all existing holders of a special mining licence to list a minimum of 30 percent of their shares on either the Main Investment Market or the Enterprise Growth Market Segment of the Dar es Salaam Stock Exchange within six months of the regulations coming into force, which was on 24 February 2017. However, we believe the listing requirement conflicts with the development agreement, and have initiated discussions with the government of Tanzania to be exempted from the listing requirement.

New labour law requirements

On 15 September 2015, theNon-Citizens (Employment Regulation) Act (theNon-Citizens Act), 2015 came into force. TheNon-Citizens Act vests powers concerning work permit with the Labour Commissioner. Thereforenon-citizens wishing to be employed in the country are required to apply and be granted a work permit before applying for a residence permit. Moreover, the Commissioner General of Immigration is required to take into consideration conditions of the work permit issued by the Labour Commissioner when granting a residence permit.

Previously, the issuance of a residence permit was inclusive of a work permit. The resident permit covered working and living in Tanzania.

Further, theNon-Citizens Act introduced the Short Term Permit (STP). The STP is granted tonon-citizens who wish to work in the country for a period of not more than six months; foreigners intending to work in Tanzania for more than 3 months are required to apply for an STP. The application for STP is made to the Ministry of Labour and Employment.

Transparency and Accountability requirements

In 2015, the Tanzania Extractive Industries (Transparency and Accountability) Act, 2015 (the TEI Act) came into force.

The TEI Act establishes the Tanzania Extractive Industries (Transparency and Accountability) Committee (the Committee), which is an independent Government entity which is an oversight body for promoting and enhancing transparency and accountability in the extractive industry.

The Committee has powers under the TEI Act to impose obligations on specified extractive industries and statutory recipients to receive information on reconciliation on payments made and revenues received by the Government. In addition, an extractive industry is required under the TEI Act to submit to the Committee annual reports containing information on local content and corporate social responsibility.

Amendment of the Mining Act

The Tanzania Mining Act has been amended by the TEI Act to confer more responsibilities to the Tanzania Minerals Audit Agency (the Minerals Agency). The Minerals Agency has been made responsible for matters related to auditing and monitoring of mineral production in Tanzania. The Minerals Agency has powers to audit quality and quantity of mineral produced and exported by mining entities, financial records of mining entities for the purposes of tax assessments, and environmental management expenditures of the mining entities for the purpose of assessment of compliance to the mine closure plan.

Environmental Impact Assessment Regulations

The Environmental Management (Fees and Charges) (Amendment) Regulations, 2016 (the Regulations) which came into effect on 2 May 2016 introduced new fees in relation to the review of the Environmental Impact Assessment on projects by the National Environmental Management Council (NEMC). According to the Regulations, the fees involved are ‘0.1% of the total project costs’. However the Regulations have not defined the phrase ‘project cost’ nor have they provided a detailed breakdown on the determination of the project cost.

AUSTRALASIA

Australia

In Australia, with a few exceptions, all onshore minerals are owned by the Crown. The respective Minister for each state and territory is responsible for administering the relevant mining legislation enacted by the states and territories.

Native Title legislation applies to certain mining tenures within Australia. Australia recognises and protects a form of Native Title that reflects the entitlement of Aboriginal people to their traditional lands in accordance with their traditional custom and laws. Should Native Title claims or determinations exist, certain Native Title processes and procedures will apply under the Native Title Act 1993 (Cth) before the tenure is granted. Tenure may be granted subject to conditions relating to Native Title

 

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rights. In the mining context, Native Title matters are managed as part of the tenement grant process. If disputes arise in relation to the grant of a particular tenement, they can be referred to the National Native Title Tribunal, established under the Native Title Act, for resolution.

Other federal and state Aboriginal heritage laws operate in parallel to the Native Title legislation. They exist predominantly for the purposes of protecting Aboriginal sites and areas of significance from disturbance. To date, there has not been any significant impact on any of AngloGold Ashanti’s tenure due to Native Title or Aboriginal Heritage legislation.

AngloGold Ashanti’s operating properties are located in the state of Western Australia where tenure is issued under, and mining operations are governed by, the Mining Act 1978 (WA). The most common forms of tenure are exploration and prospecting licences, mining leases, miscellaneous licences and general purpose leases. In most Australian states, if the holder of an exploration licence establishes indications of an economic mineral deposit in the area covered by the exploration licence and complies with the conditions of the grant, the holder of the exploration licence has a priority right against all others to be granted a mining lease which gives the holder exclusive mining rights with respect to minerals on the property. A general purpose lease may also be granted for one or more of a number of permitted purposes. These purposes include erecting, placing and operating machinery and plants in connection with mining operations, depositing or treating minerals or tailings and using the land for any other specified purpose directly connected with mining operations.

Mining tenures will be granted with endorsements and conditions relating to protection of the environment. Exploration and mining operations may also require separate approval from the state, territory or federal environment minister, which may require completion of an environmental impact assessment pursuant to applicable protection legislation prior to commencement. Further, an operating licence under the relevant environmental protection legislation in the state or territory may also be required for certain mine processing or mining-related operations.

It is possible for an individual or entity to own an area of land for infrastructure purposes and for another individual or entity to be granted the right to explore for or mine any minerals located on or under the surface of the same area. Typically, the maximum initial term of a mining lease is 21 years and the holder has the right to renew the lease for an additional 21 years. Subsequent renewals are granted at the discretion of the respective state or territory’s minister responsible for mining rights. In Western Australia, mining leases can only be assigned with the prior written consent of the minister.

Government royalties are payable by the holder of mining tenure in respect of minerals obtained from the relevant area of land at the rates specified in the relevant legislation in each state or territory. The royalty on gold production in Western Australia is payable quarterly at a fixed rate of 2.5 percent of the royalty value of gold metal produced and sold. The royalty value is calculated by multiplying the amount of gold produced during a given month by the average gold spot price for that month. In addition, the holder of a mining tenure is required to pay annual rent in respect of the tenure. In Western Australia there is a minimum annual expenditure requirement for prospecting and exploration licences and mining leases. Exemptions from the expenditure requirement can be obtained if certain conditions are satisfied.

AngloGold Ashanti has been granted21-year term mining leases with rights of renewal to all of its mining areas in Australia, including its proportionate share of joint venture operations and accordingly it has, together with its joint venture partners where applicable, the exclusive right to mine in those areas. Both the group and its joint venture partners are fully authorised to conduct operations in accordance with relevant laws and regulations. The mining leases and rights of renewal cover the currentlife-of-mine at AngloGold Ashanti’s operations in Australia. At Sunrise Dam the deposit spans two mining leases covering approximately 1,429 hectares. Both leases are currently in good standing, with expiry dates in 2032 and 2037 respectively. At Tropicana the deposit is situated upon a single mining lease covering approximately 27,228 hectares, which is currently in good standing, with an expiry date in 2036.

AMERICAS

Argentina

Land ownership & mining rights

The Argentinean Mining Code governs mining activity in the country. Special regimes exist for hydrocarbons and nuclear minerals. In the case of most minerals, the Argentinean Mining Code establishes that the owner of the land is not the owner of the mineral rights; these are held by the national or provincial governments (depending on the location of the minerals). The national or provincial government, as applicable, is required by the Argentinean Mining Code to grant whomever discovers a new mine title to the mining concession.

 

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The Argentinean Mining Code regulates exploration permits and mining concessions. Exploration permits grant their holders exclusivity rights to any mineral discoveries, including those made by a third party within the exploration area covered by the permit. Exploration permits are limited in time and as to the extent of the exploration area, are subject to the payment of a single-time fee, and also require a minimum exploration work programme and schedule to keep the permit in force.

The Argentinean Mining Code also regulates mining concessions, or exploitation rights. Priority for receiving a mining concession is given to the registered discoverer of the mine, which holds the exploration permit. Once the application for a mine has been submitted, the applicant may commence works and must submit a legal survey of the units requested for the new mine. The application and the legal survey may be opposed by third parties following specific proceedings set forth in the Argentinean Mining Code. Approval and registration of the legal survey by the Provincial mining authority constitutes formal title to the mining concession.

Any mining company wishing to commence or modify any mining-related activity, as defined by the Argentinean Mining Code, including prospecting, exploration, exploitation, development, preparation, extraction, and storage of mineral substances, as well as property abandonment or mine closure activity, is required to prepare and submit to the competent Provincial environmental authority an Environmental Impact Assessment (EIA) prior to commencing the work. Each EIA is required to describe the nature of the proposed work, its potential risk to the environment, and the measures that will be taken to mitigate that risk. If accepted by the competent authority, the EIA is used as the basis to create a Declaration of Environmental Impact (DEI) to which the mining company is required to adhere during the mining-related activity at issue. The DEI is required to be updated at least on a biannual basis. Sanctions and penalties fornon-compliance with the DEI are outlined in the Environmental Protection section of the Argentinean Mining Code, and may include warnings, fines, suspension of quality certifications, restoration of the environment, temporary or permanent closure of activities, and withdrawal of authorisation to conduct mining-related activities.

Holders of mining concessions must comply with three main conditions: payment of an annual fee, investment of a minimum amount of capital, and the carrying out of a reasonable level of exploitation. Failure to do so could lead to forfeiture of the mining concession, which would then revert back to the Province.

In the case of Cerro Vanguardia, AngloGold Ashanti’s operation in Argentina, the mining concession holder is AngloGold Ashanti’s partner, FomentoMinero de Santa Cruz S.A. (Fomicruz). On 27 December 1996, Fomicruz entered into a usufruct agreement whereby Cerro Vanguardia S.A. was granted an irrevocable right to exploit the Cerro Vanguardia deposit (encompassing an area of approximately 543 square kilometres) for a40-year period, which expires on 26 December 2036. Cerro Vanguardia S.A. is an Argentinean company controlled by AngloGold Ashanti, with Fomicruz as minority shareholder.

In addition to the Argentinean Mining Code, between 1993 and 1995, Argentina implemented several federal laws to offer foreign companies attractive incentives for exploration and mining in Argentina, the Mining Investment Law (Law No. 24, 196, as amended, and related legal provisions) being the most important one. Such incentives include, amongst others, import duty exemptions, accelerated depreciation of fixed assets, a 3 percent cap on Provincial royalties, value added tax refunds for exploration-related expenses incurred by companies registered under the Mining Investment Law, and, subject to the filing of a feasibility study for the relevant mining project, a30-year stability as to tax, customs and foreign exchange duties. Cerro Vanguardia S.A. obtained its tax, customs and foreign exchange stability certificate in 1996.

Past and potential regulatory changes

On 30 September 2010, the National Law on Minimum Requirements for the Protection of Glaciers was enacted in Argentina, banning new mining exploration and exploitation activities on glaciers and “peri-glacial” areas. The law also subjectson-going mining activities in those areas to an environmental audit. If such audit results in material impacts on glaciers and “peri-glacial” areas, the relevant authority is empowered to take action, including suspension or relocation of the activity. The law establishes a broad definition of “peri-glacial” areas that, together with glacial areas, must yet be surveyed by an existing national Government Agency specifically appointed to this end. The constitutionality of the law has been challenged by some mining companies along with the Province of San Juan (which hosts large mining projects). Injunctions granted by lower courts which had suspended the application of the law in that Province were lifted by the National Supreme Court of Justice of Argentina. Although the injunctions have been lifted, the language that the Court used in the decision implies that until an inventory of glaciers is completed as mandated by the Law, the case is moot. Therefore, the case has no practical implications for the operations of Cerro Vanguardia at this time.

 

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On 26 October 2011, Decree 1722/2011 (Repatriation Decree) was issued, which imposes on oil, gas and mining companies operating in Argentina the obligation to repatriate all the proceeds of their exports from Argentina and to exchange such proceeds for Argentinean legal currency in the domestic banking system. All exporters, other than oil, gas and mining companies, have been operating under such regime since late 2001. Mining companies, on the other hand, were entitled to two exceptions: (i) a decree of 2003 applicable to mining companies with tax, customs and foreign exchange stability certificates obtained prior to the date on which such a decree was enacted (which is the case of Cerro Vanguardia); and (ii) a decree of 2004 applicable to mining companies with tax, customs and foreign exchange stability certificates obtained after the date on which such decree was enacted. Both exceptions have not been formally superseded by the Repatriation Decree, but appear to conflict with it, and such conflict may result, in some cases, in a violation of mining companies’ rights under the Mining Investment Law.

On 27 December 2011, the Argentinean National Congress passed Law 26,737 which implemented a set of rules restricting the ownership of rural land by foreigners (including foreign individuals or any kind of legal entity controlled by foreign individuals or legal entities). The main restrictions are as follows: (i) foreigners cannot own in the aggregate more than 15 percent of the entire rural land of Argentina, the same cap being applicable to each province and municipality; (ii) foreigners will not be allowed to purchase more than 1,000 hectares in theso-called “zona nùcleo”, which comprises the main agricultural areas of central Argentina or an “equivalent” surface depending on the location of the land and its productive potential; and (iii) foreigners will not be allowed to buy land that contains, or is adjacent to, relevant and permanent water bodies (such as rivers and lakes). Although exploration permits and mining concessions are not the subject matter of the restrictions placed by this law, certain rights granted to foreign mining companies under the Argentinean Mining Code may be restricted by this new law. For example, the right that holders of mining concessions currently have to force the surface owner to sell the land to the holder of the mining concession might be restricted if the concession holder is a foreign individual or a legal entity controlled by foreigners.

Ten provinces in whose territories the main mining projects of Argentina are located, signed a document with the Federal Government entitled Federal Mining Agreement (FMA). The purpose of the FMA is, amongst other things, to increase provincial revenues from the mining industry by creating legal entities owned by provincial governments that would work in association with private mining companies. This scheme is not new in Argentina and it has been used by some provincial governments, amongst them the Santa Cruz Province (through Fomicruz), in which the Cerro Vanguardia project is located. The FMA also contemplates other forms of revenues such as the formation of special trusts to be funded by mining companies in order to finance education, health and other programmes. Increase in royalty rates is not specifically contemplated in the FMA. The Provinces that signed the FMA had previously formed a special association of provinces, supported by the National Government.

In Argentina, the current regulatory regime of royalty payments is expected to change and several different options and payment thresholds have been discussed. In December 2012, the Santa Cruz Province changed the mining royalty from one percent to three percent.

Brazil

Land ownership and mining rights

General legal aspects

The Brazilian Constitution of 1934 states that, for purposes of exploration and exploitation, deposits and other Mineral Resources constitute property separate from the soil and belong to the Federal Union. Exploration and exploitation of such Mineral Resources may take place only with the Federal Union’s concession and in such a way as to protect the national interest. Federal law sets out penal and administrative sanctions for conduct and activities deemed harmful to the environment.

In Brazil, the National Department of Mineral Production (DNPM) is the state body within the Mines and Energy Ministry (MME) that is responsible for: (i) the registration of mining titles, (ii) the grant of authorisations and concessions, (iii) the supervision of mining activities and mining titleholders, and (iv) the issuance of supplementary rules in relation to mining activity.

Under the current Mining Code, there are two kinds of mines: (i) claimstake mines (Minas Manifestadas), for which rights were acquired before 1934 and exist independently of any mining licence or authorisation from the Federal Government and for which the Mineral Resources constitute property of the landowner and (ii) granted mines, which are those that rely on grants from the Federal Government for mineral exploration or exploitation (pursuant to the Constitution). AngloGold Ashanti’s operations in Brazil consist of both claimstake mines and granted mines.

 

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At AGA Mineraçao, Cuiabá has a single concession covering a total area of 3,662 hectares, Lamego is covered by three geographically contiguous concessions totally 1,622 hectares and Córrego do Sítío is hosted by five geographically contiguous concessions covering a total area of 6,017 hectares. All of these are in good standing. At Serra Grande, the company has interests in or agreements over 61,500 hectares in Crixas Greentone belt, representing approximately 87 percent of the relevant tenements that correspond to all current exploration and mining activities. These have been held since 1987. Brazilian mining concessions remain valid up to the depletion of the Ore Reserve and Mineral Resource.

Mining activities in granted mines must be performed in two defined stages: (i) exploration, which entails defining and evaluating the deposit and determining the feasibility of exploitation, and (ii) exploitation, which involves coordinating operations aimed at the industrial exploitation of the mineral deposit, from the extraction of useful minerals to their processing. Exploration authorisations issued by DNPM are valid for one to three years. Extensions can be obtained if necessary. In contrast, exploitation rights, once granted, are valid for the lifetime of the deposit, provided the mining titleholder complies with all legal requirements. Pursuant to these requirements, for example, titleholders must (i) start work on mineral exploitation within six months from the date of publication of the Exploitation Concession, (ii) continue their mining activities until the mineral deposit has been exhausted, in accordance with the Economic Exploitation Plan (Plano de Aproveitamento Econômico) approved by DNPM and (iii) refrain from suspending mining activities without prior notice to DNPM.

During the exploration period, the mining titleholder has to pay an Annual Rate per Hectare (TAH – Taxa Anualpor Hectare), subject to a maximum value set by law. In the exploitation period, regardless of the legal regime governing the project (whether claimstake or granted mines), the mining titleholder has to pay the Financial Compensation for Exploiting Mineral Resources (CFEM – Compensação Financeirapela Exploração Mineral). The CFEM is currently calculated based on revenues, minus some deductions authorised by mining law.

At the end of 2011 and the beginning of 2012 the states of Minas Gerais, Pará, Amapá and Mato Grosso do Sul each created a new tax (duty) on research, extraction and exploration activities as well as on the use of Mineral Resources carried out in those states. This tax could range from BRL3.00 to BRL6.50 per ton. In the state of Minas Gerais, however, gold ore was exempted from the collection of this new duty.

Potential regulatory changes

The Federal Government is contemplating changes to the mining legislation, and those proposed changes were submitted in 2013 to the National Congress for discussion and consideration. Its goals would be to (i) strengthen the role of the Federal Government in regulating the mining industry, (ii) attract more and better investments to the mineral sector, (iii) encourage maximal use of Ore Reserves, and (iv) encourage members of the industry to add value to mineral products.

The government’s proposals have institutional, legal and financial facets. Institutionally, the proposals would create a National Council of Mineral Policy to advise the Presidency of Brazil and the MME on, and develop guidelines and directives for, the mining sector. They would also transform the DNPM into a regulatory agency with negotiation and inspection powers.

Legally, the proposals would change the rules governing access to mining titles. While exploration authorisations would be effective for a longer period of five years, they would be renewable for only one extra year, at the discretion of authorities. Companies would also have to demonstrate that they are investing in exploration activities on a yearly basis.

Exploitation rights would be limited to35- or40-year grants renewable at the discretion of authorities. The granting of rights would become a more discretionary process and would result in a Formal Adhesion Contract for Exploitation rather than in an open-ended concession.

The proposals would raise CFEM rates for trade in gold ore from one percent on net invoicing to two percent on gross invoicing. They would also create new calculation methods and incidence hypotheses, notably with regard to transactions between related parties.

In light of the November 2015 tailings dam collapse in Minas Gerais, there has been discussion of including tougher requirements related to tailings dams (e.g., mandatory insurance in case of environmental catastrophe).

Colombia

Land ownership and mining rights

In Colombia, all mineral substances are the property of the state of Colombia. The underlying principle of Colombian mining legislation isfirst-in-time,first-in-right.

Mining activities are regulated by the Mining Code, Act 685, 2001. Amendments to the Mining Code enacted in 2010 pursuant to Act 1382 were found unconstitutional. The Constitutional Court stayed its ruling for two years to give the government the opportunity to present a new law. The government was expected to publish new changes to the Mining Code in the second half of 2012, but has not yet presented any revisions of the law to Congress.

 

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The filing of an exploration and exploitation proposal triggers a right of preference to obtain rights over the targeted area, provided it is available. Such area cannot exceed 10,000 hectares. Upon receipt of a proposal, the relevant government agency determines whether another proposal or contract already governs the area. If there are nopre-existing claims, the government agency grants the applicant a “free zone”.

The concession contract

The government agency grants exclusive concession contracts for exploration and exploitation. Such concessions allow concessionaires to conduct the studies, works and installations necessary to establish the existence of minerals and to organise their exploitation. Upon being awarded a mining concession, a company must take out an insurance policy to cover the costs associated with potential environmental damage as well as breaches of its mining obligations. It may then proceed with exploration activities. Once the exploration phase is complete, the concessionaire files a new plan regarding proposed works and installations. With the award of the mining concession or tenement contract, there are specified timelines for the completion of the various phases of a mining project, e.g. exploration, construction, exploitation. The company must comply with these timelines unless performance is excused, for example, due to force majeure or extensions/modifications to the timelines are received.    

If the company does not comply with the specified timelines for the completion of the various phases of a mining project, the mining authority may revoke the company’s concession contracts or mining licenses. AngloGold Ashanti Colombia S.A. (AGAC) applied for consolidation of its concession contracts related to La Colosa, in respect of which AGAC was not in compliance with some of the specified timelines. The application for consolidation was approved in March 2017, which remedied thenon-compliance of each consolidated concession and reset the specified timelines. La Colosa has a single concession which covers a total area of 9,210 hectares and expires in 2037.

In order to obtain an authorization from the National Environmental Licensing Authority of Colombia to carry out the Project at the stages of construction and assembly, exploitation tasks and works, closure and abandonment of the mine, the Company must prepare an Environmental Impact Study for approval by this authority.

Environmental licenses are granted for the entire life of the project and cover all phases: construction, assembly, operation, maintenance, dismantling, final restoration, abandonment and / or termination.

The initial term of concessions is 30 years. To receive an extension, a concessionaire must file a request two years before the termination of the initial term, and must substantiate the application with economic, environmental and technical information. Because the extension is not automatic, the concessionaire must renegotiate the conditions of the grant. Any company holding a concession that wishes to obtain a renewal of the contract must be up to date in all its legal and contractual obligations and must present a new plan of works and installations to be executed after the contract is renewed. The term of a concession and all the contractual obligations that arise from it are deemed to take effect as of the date of registration of the contract at the National Mining Register.

AngloGold Ashanti’s core mining concession contracts provide that the mining authority has the discretion to declare the underlying concession void if AngloGold Ashanti Colombia S.A. (AGAC) breaches applicable environmental laws or regulations. If the mining authority were to exercise such discretion against AGAC, AGAC would be required to abandon its projects and all of its other existing mining concession contracts. Pending proposals for new mining concession contracts would also be cancelled and AGAC would be banned from doing business with the Colombian government for a period of five years. As a result, AGAC would be unable to conduct any mining exploration or development activities during such period. However, this would not affect other AngloGold Ashanti subsidiaries operating in Colombia, which hold singularly or in concert with joint venture partners the majority of the company’s concession contracts in Colombia.

There are some areas where mining activity is prohibited. These areas are:

 

National parks;

 

Regional parks;

 

Protected forest reserves;

 

Páramos (included in Act 1382, introduced in 2010); and

 

Wetlands, pursuant to the Ramsar Convention. 

Some forest reserves are not “protected”, but are set aside for active forestry purposes. Such forest reserves must be “extracted” after initial prospection, meaning that the concessionaire must obtain a specific permit to partially and temporarily change the use of the soil before pursuing exploration activities. Resolution 187/2016, passed by the federal government in

 

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late 2016, identifies areas that the Ministry of the Environment has determined to be “páramos” areas, or páramos transition areas. In these areas there are limitations on industrial or commercial work being performed, including mining. The regulation also specifies a process to determine what work, if any, can be performed in a páramos-designated area. Certain areas designated as “páramos” are within the mining footprint currently envisioned for La Colosa. The company is evaluating the impact of the Resolution 187/2016, if any, to the current plan for La Colosa. Further, the company is working with the federal government to determine if the designations contained in Resolution 187/2016 are technically accurately and legally defensible, and what the process will be to determine what work, if any, can be performed in certain páramos areas.

Cannon fees and royalties

Cannon fees are due from the moment the area is declared available for the company (rather than from the time the concession contract is signed). Such fees change based on the number hectares held by the concessionaire, as follows:

 

0-2,000 hectares, one legal daily minimum wage (approximately $9.00) per hectare per year

 

2,001-5,000 hectares, two legal daily minimum wages (approximately $18.00) per hectare per year

 

5,001-10,000 hectares, three legal daily minimum wages (approximately $27.00) per hectare per year

Once exploration is complete and the mining infrastructure is in place, the concessionaire must begin paying royalties. Royalties paid to the Colombian government consist of a percentage of the primary product andsub-products being exploited. For gold, gross monthly income is multiplied by 0.8, to which a four percent royalty is applied.

 

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PINES programme

In 2013 the Federal government instituted the PINES programme that will aid in promoting certain projects that are deemed to have a national interest. This designation provides for greater oversight from the national government. La Colosa, Gramalote and Nuevo Chaquiro projects are designated as PINES projects. All of our three advanced exploration projects are considered of national strategic interest.

MINE SITE REHABILITATION AND CLOSURE

Closure, an integral part of operations

All mining operations eventually cease. An integral aspect of operating AngloGold Ashanti’s mines is ongoing planning for and, where feasible, implementation of concurrent rehabilitation, together with an estimate of associated liability costs and the placement of adequate financial provisions and assurances to cover these costs.

AngloGold Ashanti revised its group closure planning management standard in 2013 and all of its operations are required to comply with the standard as their closure plans are reviewed and updated.

Closure planning is an activity that starts at the exploration and mine design stage and continues throughout the life of mine:

 

New projects include a closure plan which takes into account future closure and associated rehabilitation and other costs.

 

The closure plan is reviewed annually and updated every three years (annually in the final three years of a mine’s life) or whenever significant changes are made, taking into account operational conditions, planning and regulatory requirements, international protocols, technological developments and advances in practice.

For many of the older mines, closure planning and the evaluation of environmental liabilities is a complex process. This is particularly so in Brazil, Ghana and South Africa, where many of the mining and other operations have taken place for more than fifty years. A particular challenge is concurrent rehabilitation, which is carried out while a mine is still operational. This practice serves to decrease the ultimate liability and reduces the final rehabilitation and closure work that must be undertaken, but has the potential to sterilise Ore Reserve, which the company might wish to exploit should conditions, such as the gold price, change.

The company’s closure standard stipulates that closure planning must be undertaken in consultation with the community. In the course of these consultations, different issues are raised which require site-specific solutions. Livelihood preservation and infrastructure are often key requirements. Communities also require information on the company’s rehabilitation of the landscape and on any lasting environmental impacts. Long-term remediation obligations, including decommissioning and restoration liabilities relating to past operations, are based on environmental management plans and comply with current environmental and regulatory requirements.

Provisions for decommissioning and rehabilitation costs are made when there is a present obligation, it is probable that expenditure on decommissioning and rehabilitation work will be required and the cost can be estimated within a reasonable range of possible outcomes. These costs are based on currently available facts, technology expected to be available at the time of theclean-up, laws and regulations presently or virtually certain to be enacted and previous experience in the rehabilitation of mine sites.

Decommissioning costs and restoration costs are provided at the present value of the expenditures expected to settle the obligation, using estimated cash flows based on current prices. Estimates are discounted at apre-tax rate that reflects current market assessments of the time value of money.

Provisions for decommissioning and for restoration (excluding joint ventures) increased from $683 million in 2015 to $705 million in 2016. This change mainly relates to changes in discount rates based on global economic assumptions and changes in mine plans, resulting in a change in cash flows and changes in design of tailings storage facilities and in methodology following requests from the environmental regulatory authorities.

 

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ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

In addition to post-mining land rehabilitation and closure requirements, AngloGold Ashanti is subject to extensive environmental, health and safety (EHS) laws and regulations in the various jurisdictions in which the company operates. These requirements govern, among other things, extraction, use, conservation and discharge of water; air emissions (including dust control); regulatory and community reporting;clean-up of contamination; land use and conservation of protected areas; worker health and safety and community health; and the generation, transportation, storage and disposal of solid and hazardous wastes, such as reagents, radioactive materials, and mine tailings. In addition, environmental laws and regulations, including the requirements contained in environmental permits, are generally becoming more restrictive. Significant EHS requirements, risks and trends affecting our mining and processing operations are described below.

Regulatory Compliance

Capital and operating costs to comply with EHS laws and regulations have been, and are expected to continue to be, significant to AngloGold Ashanti. In addition, AngloGold Ashanti could incur fines, penalties and other sanctions, environmentalclean-up costs, and third-party claims for personal injury or property or natural resources damages; suffer reputational damage; and be required to install costly pollution control equipment or to modify or suspend operations, as a result of actual or alleged violations or liabilities under EHS laws and regulations. Failure to comply with applicable EHS laws and regulations may also result in the suspension or revocation of permits and, in some jurisdictions, our right to mine a given concession. AngloGold Ashanti’s ability to obtain and maintain permits and other approvals and to successfully operate in particular communities may be adversely impacted by real or perceived effects on the environment or human health and safety associated with AngloGold Ashanti’s or other mining companies’ activities. In addition, unknown environmental hazards may exist on the company’s properties which may have been caused by previous owners or operators.

Water Management

AngloGold Ashanti’s mining and processing operations are heavily dependent upon access to substantial volumes of water required for such operations. Typically,water-use permits or water rights in each country impose limits on the quantity of water that can be extracted from certain sources and require, among other things, that wastewater from mining operations meet certain water quality criteria upon discharge. Water supply, quality and usage are areas of concern globally, but are particularly significant for operations in Brazil, Ghana and South Africa, and for exploration projects in Colombia, where there is significant potential environmental and social impact and a high level of stakeholder scrutiny. Any failure to secure access to suitable water supplies, or achieve and maintain compliance with the requirements of the permits or licenses, could result in curtailment or suspension of production at the affected operation. Incidents of water pollution or shortage can, in extreme cases, lead to community protest and ultimately result in the withdrawal of community and government support for the company’s operations.

Where feasible, the company operates a “closed loop” system which recycles the water used in its operations without discharging it to the environment. In some areas, however, such as Ghana and Brazil, high levels of rainfall and surface water runoff mean that a closed loop system is not feasible and that discharges, after water treatment if necessary, must take place.

Waste Management

Mining and mineral processing operations generate waste rock and tailings.

Duringopen-pit mining, large volumes of soil and/or rock (overburden) are generated to expose the ore body. Similarly, waste rock is generated during drilling and developing access to underground ore bodies. Overburden and waste rock typically containsub-economic levels of gold and are deposited as large waste rock dumps. Mine tailings are the process waste generated once grinding and extraction of gold from the ore is completed in the milling process and are deposited as slurry in large storage facilities specifically designed for this purpose.

The impact of a breach, leak or other failure of a tailings storage facility can be significant, and the company therefore monitors such facilities closely in accordance with the company’s internal standards, independent review, national regulatory requirements and commitments made to local communities. The occasional well-publicised failure of a third-party tailings facility and the potential impact of such failure also mean that these facilities are generally tightly regulated. An incident at the company’s operations could result, among other things, in enforcement, obligations to remediate environmental contamination, and claims for property or natural resources damages and personal injury and negative press coverage. An incident at another company’s operations has potential to result in governments tightening regulatory requirements and restricting other mine operators in response.

 

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Groundwater Impacts and Environmental Remediation

AngloGold Ashanti has identified groundwater contamination plumes at certain of its operations. Numerous scientific, technical and legal studies have been undertaken to assist in determining the magnitude of the impact and to find sustainable remediation solutions. Based on those studies as well as discussion with regulators, the company has taken steps, including monitored natural attenuation and phyto-technologies, to address soil and groundwater contamination. Subject to the completion of trials and the technology being a proven remediation technique, no reliable estimate can be made for the obligation. Should these obligations be significant, this could have a material adverse impact upon AngloGold Ashanti’s results and its financial condition.

As AngloGold Ashanti or its predecessors have a long history of mining operations in certain regions, issues may arise regarding historical as well as potential future environmental impacts on those areas.

In addition, AngloGold Ashanti identified a flooding and future pollution risk to deep groundwater in the Klerksdorp, Orkney, Stilfontein and Hartebeesfontein (KOSH) area and Far West Rand goldfields in South Africa. AngloGold Ashanti’s Vaal River operations are part of the KOSH area and its West Wits operations are part of the Far West Rand goldfields. The premature closure of neighbouring mines owned by other mining companies in both areas has led to increased pumping obligations on AngloGold Ashanti and these are anticipated to increase in future, requiring additional legal requirements including permits, risk mitigation which may lead to increased costs for the group.

For example, several gold mining companies operate and operated underground mines upstream from AngloGold Ashanti’s Vaal River Operations. In 2005, DRD Gold owned and operated the Buffelsfontein Gold Mining Company and the Hartebeesfontein Gold Mining Company (now both known as Buffelsfontein Gold Mining Company or Buffelsfontein). Buffelsfointein operated mines upstream from AngloGold Ashanti. DRDGold had entered into a contract with Stilfontein Gold Mining Company to pump water from its Margaret Shaft in order to keep the Buffelsfontein shafts dry. In 2005 DRDGold announced that it was ceasing its operations at Buffelsfontein and would also stop pumping the 52Ml/day of underground water from the Stilfontein Margaret Shaft. Stilfontein was in final liquidation at the time. DRDGold also threatened to place Buffelsfontein into liquidation.

AngloGold Ashanti approached the courts on an urgent basis asking the court to order that Buffelsfontein continue pumping underground water at the Margaret shaft and at its Buffelsfontein shafts. If underground water pumping stopped at Margaret Shaft it would flood the downstream mines and the downstream mines would not be able to handle the sudden ingress of water.

The Department of Water Affairs (now known as the Department of Water and Sanitation) responded to the urgent application by issuing a series of Directives. The final Directives directed AGA, Harmony Gold (the owner of Shafts 1 to 7 previously owned by AGA and ARM and currently owned by Chinese Africa Precious Metals (CAPM)), and Buffelsfontein to jointly pump the underground water from Margaret Shaft and to pump any water arising in their own operations. Harmony acquired the issued share capital of ARMGold in September 2003 and managed the gold operations of ARMGold in the Vaal River area. In August 2007 ARMGold sold its mining operation to Pamodzi Gold Orkney (Pty) Ltd (“Pamodzi”). Pamodzi subsequently went into liquidation and the shafts are now owned and operated by CAPM.

Pursuant to the Directives the companies formed a not for profit company, Margaret Water Company, to manage the underground water pumping at Margaret Shaft.

Also, from July to December 2014 Buffelsfontein Mine (owned by Village Main Reef (VMR), now Heaven-Sent), ceased all pumping of underground water at its Buffelsfontein operations, AngloGold Ashanti had already implemented its plans to manage underground water that it anticipated would eventually reach its operations. The infrastructure to pump this water out from underground was completed in December 2015, with the water reaching the company’s Great Noligwa boundary on 23 January 2016. Pumping is currently continuing with the Vaal River metallurgical process utilising this recovered water.

AngloGold Ashanti continues to comply with the Directive and continues to pay its financial contribution towards the maintenance and pumping of water at Margaret Water Company, Water from Margaret Water Company is being utilised in the Mine Waste Solutions and Vaal River metallurgical process. Whilst AngloGold Ashanti has been proactive in planning and installing of infrastructure to manage this water, the risk of flooding remains, which could have an adverse impact on its results of operations and financial condition.

In the West Wits district, after Blyvooruitzicht Gold Mining Company was placed in provisional liquidation in August 2013, AngloGold Ashanti secured a court order for unfettered access rights to Blyvooruitzicht 4 and 6 shafts to continue the pumping of underground water. AngloGold Ashanti then purchased from Blyvooruitzicht the rights of access to the 4 and 6 shafts as well as the relevant infrastructure to continue pumping underground water and transferred the assets and rights to its newly incorporated subsidiary Covalent Water Company. In November 2014 the Department of Water and Sanitation issued a directive directing AngloGold Ashanti through Covalent to dewater4 and 6 shafts and discharge the water.

Climate Change and Greenhouse Gas Regulation

Greenhouse gases, or “GHGs”, are emitted directly by AngloGold Ashanti’s operations, as well as by external utilities from which AngloGold Ashanti purchases electricity. Currently, a number of international and national measures to address or limit GHG emissions are in various phases of discussion or implementation in the countries in which the company operates. The outcome of the climate change negotiations may, in due time, have the effect of requiring AngloGold Ashanti to reduce its direct GHG emissions or energy use or to incur significant costs for GHG emissions permits or taxes including through costs passed on by electricity utilities which supply the company. AngloGold Ashanti also could incur significant costs associated.

 

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with capital equipment, GHG monitoring and reporting and other obligations to comply with applicable requirements. The most likely source of these obligations is through state-level implementation of new obligations pursuant to evolving climate change regulatory regimes.

As a result of commitments made at the UN climate conference in Durban, South Africa in December 2011, certain members of the international community negotiated a treaty at the December 2015 Conference of the Parties in Paris (COP 21). The Paris Agreement came into force in November 2016. Additional measures addressing GHG emissions may be implemented at the national or international levels. These, or future, measures could require AngloGold Ashanti to reduce its direct GHG emissions or energy use or to incur significant costs for GHG emissions permits or taxes or have these costs or taxes passed on by electricity utilities which supply the company’s operations. AngloGold Ashanti also could incur significant costs associated with capital equipment, GHG monitoring and reporting and other obligations to comply with applicable requirements.

In 2015 South African National Treasury released a draft bill for proposed carbon tax with the view of bringing the tax into effect in 2017, however these arrangements have been deferred to 2017, making the likelihood of implementation closer to 2018. AngloGold Ashanti’s liability for direct CO2 emissions is significantly lower than that the liability for indirect CO2 emissions for which AngloGold Ashanti already pays a levy per kilowatt hour of purchased electricity that is generated from fossil fuels. The draft Carbon Tax Bill provides an indication of the expected levels of the carbon tax starting at ZAR120 (approximately $9) per tonne of CO2 emitted. The draft Bill allows discretion to the Minister of Finance to increase the tax annually, whilst offset mechanisms are provided for in the draft bill, it is unlikely that they will present a viable opportunity for AngloGold Ashanti in cost reductions. It is probable that the tax will be levied on sectors that comprise elements of the AngloGold Ashanti supply chain. Consequently, it is likely that the costs associated with those elements of the supply chain will increase for the medium- and long-term.

In 2010, Brazil launched the National Climate Change Policy, which established a voluntary reduction target of 1.2 billion tonnes of CO2 below the projected emissions in 2020. The policy required the development of sector-specific plans in order to meet the target. Amongst other plans, it is intended to reduce deforestation in the Cerrado biome, where AngloGold Ashanti operates, by 40 percent compared to the average deforestation in 1999-2008 and expand renewable energy production and energy efficiency programmes. The policy also provided for a Brazilian GHG trading scheme, which is yet to be designed. While Brazil is not yet requiring mandatory GHG emissions reporting at the national level, some state environmental agencies have requested companies to voluntarily submit GHG emissions management plans, however Goiás and Minas Gerais State (in which AngloGold Ashanti operates) do not currently require GHG emissions management plans for mining projects.

In Australia, the government introduced the carbon emissions Safeguard Mechanism, aimed at limiting future growth in Greenhouse Gas (GHG) emissions. After setting baseline emission thresholds, the Safeguard Mechanism requires that companies submit carbon credits or pay penalties for excess emissions. Sunrise Dam successfully applied using its baseline emissions in accordance with the regulatory scheme’s default mechanism. Tropicana will apply for a baseline emission level using an alternative calculated baseline method during 2017 to ensure that it is not penalised for its planned ramp up in production rate. Whilst the baseline emissions set for Sunrise Dam and Tropicana aim to mitigate the need for additional penalties or taxes to be levied, AngloGold Ashanti could incur significant costs associated with capital equipment, GHG monitoring and reporting and other obligations to comply with changing legal requirements.

In addition, potential physical risks to our operations as a result of climate change include changes in rainfall rates or reduced water availability, rising sea levels, higher temperatures and extreme weather events. Events or conditions such as flooding or inadequate water supplies could disrupt mining and transport operations, mineral processing and rehabilitation efforts, could create resource shortages and could damage the company’s property or equipment and increase health and safety risks on site. Such events or conditions could have other adverse effects on the company’s workforce and on the communities in the area around its mines, such as an increased risk of food insecurity, water scarcity and prevalence of disease.

Occupational and Community Safety and Health and Tropical Diseases

AngloGold Ashanti’s operations are subject to a variety of laws and regulations designed to protect and improve the safety and health of employees. In some of the jurisdictions in which AngloGold Ashanti operates, the government enforces compulsory shutdowns of operations to enable investigations into the cause of accidents at those operations. Certain of the company’s operations have been temporarily suspended for safety reasons in the past. In South Africa, in particular,so-called Section 54 safety stoppages have become a significant issue for mining companies. The business has been exposed to safety stoppages which can, individually and/or in aggregate, have a material impact on operations. AngloGold Ashanti is also enhancing safety programmes, and a revised Group Safety strategy have been introduced. In South Africa in particular the work culminated in a revised “Safe Production Strategy” which forms the basis of the work in the Region to ensure a highly effective compliant organisation, resulting in a reduction in Section 54 stoppages and associated improved levels of performance with regard to fatalities, ultimately striving for Zero Harm.

 

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In addition, AngloGold Ashanti is subject to health and safety regulations relating to occupational disease. The primary areas of focus in respect of occupational health of employees within the company’s operations are noise-induced hearing loss (NIHL) and occupational lung diseases (OLD), which include occupational tuberculosis and silicosis in individuals exposed to silica dust. Silicosis has been particularly prevalent in South Africa and has also arisen at the company’s Continental Africa and Brazilian operations, albeit to a far lesser extent. AngloGold Ashanti provides occupational health services to its employees at its occupational health centers and clinics, and continues to improve preventative occupational hygiene initiatives, such as implementing various hazard control measures and providing employees with Personal Protective Equipment. If the costs associated with providing such occupational health services, implementing such control measures or supplying such equipment increase significantly beyond anticipated or budgeted amounts, this could have an adverse effect on AngloGold Ashanti’s results of operations and its financial condition. Actual and alleged health and safety incidents or breaches of standards may also adversely impact the company’s reputation.

The South African government, by way of a cabinet resolution in 1999, proposed a possible combination and alignment of benefits of the Occupational Diseases in Mines and Works Act (ODMWA) that provides for compensation to miners who have OLD, and the Compensation for Occupational Injuries and Diseases Act (COIDA), that provides for compensation in respect of job related injuries and compensation ofnon-miners who have OLD. Work on merging the two Acts is underway, although it remains unclear as to what progress will be made in the short- to medium term. COIDA provides for compensation payments to workers suffering permanent disabilities which are classified as pension liabilities if the permanent disability is above a certain threshold, or a lump sum compensation payment if the permanent disability is below a certain threshold. ODMWA provides for a lump sum compensation payment to workers suffering from OLD as well as the payment of medical expenses over the claimant’s lifetime. If the proposed combination of COIDA and ODMWA or amendments to ODMWA were to occur, this could further increase the amount of statutory compensation that miners employed by AngloGold Ashanti could claim, which consequently could have an adverse effect on AngloGold Ashanti’s financial condition.

AngloGold Ashanti is subject to numerous claims, including claims related to silicosis and other OLD, and could be subject to similar claims in the future. Please refer to “Item 8: Financial Information – Legal Proceedings – South Africa – Silicosis litigation.”

In addition to OLD, AIDS and associated diseases remain major health care challenges faced by AngloGold Ashanti’s South African operations. Workforce prevalence studies indicate that HIV prevalence rates among AngloGold Ashanti’s South African workforce may be as high as 30 percent. AngloGold Ashanti continues to implement programmes to help those infected with HIV and prevent new infections from spreading. Since 2001, the company has offered a voluntary counseling and HIV testing programme for employees in South Africa and, since 2003, has offered anti-retroviral therapy to HIV positive employees who meet the current medical criteria and who desire this treatment.

Malaria and other tropical diseases also pose health risks at all of the company’s operations in Central, West and East Africa where such diseases may assume epidemic proportions because of ineffective national control programmes. Malaria is a major cause of death in young children and pregnant women but also gives rise to deaths and absenteeism in adult men. All affected company operations have malaria control programmes in place.

Other conditions such as heart disease, chronic diseases and obesity are of increasing incidence and concern. Such diseases impair the health of workers and negatively affect productivity and profitability as a result of workers’ diminished focus or skill, absenteeism, treatment costs and allocated resources.

AngloGold Ashanti cannot guarantee that any current or future medical programme will be successful in preventing or reducing the injury and illness rates amongst its employees or in affecting consequent morbidity or mortality rates. AngloGold Ashanti may incur significant costs in addressing this issue in the future, which could also adversely impact the company’s results of operations and financial condition.

 

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ANGLOGOLD ASHANTI GLOBAL OPERATIONS: 2016

 

LOGO

Operations and projects

 

AMERICAS

  

CONTINENTAL

AFRICA

  

SOUTH AFRICA

1.  Argentina  4. Guinea  9.  South Africa
  Cerro Vanguardia (92.5%)   Siguiri (85%)    Vaal River
2.  Brazil  5. Mali    Kopanang
  Serra Grande   Morila (40%)(1)    Moab Khotsong
  AGA Mineração   Sadiola (41%)    West Wits
3.  Colombia  6. Ghana    Mponeng
  Gramalote (51%)   Iduapriem    TauTona
  La Colosa   Obuasi    Surface Operations(2)
  Quebradona (92.72%)  7. DRC    
     Kibali (45%)(1)    
AUSTRALASIA  8. Tanzania    
10.  Australia   Geita    
  Sunrise Dam       
  Tropicana (70%)       
         
         
         
         

Percentages indicate the ownership interest in AngloGold Ashanti, whether held directly or indirectly. All operations are 100%-owned unless otherwise indicated.

 

(1) 

Both Morila and Kibali are managed and operated by Randgold Resources Limited.

(2) 

Surface Operations includes First Uranium SA, which owns Mine Waste Solutions (MWS). MWS is managed and operated as a separate cash-generating unit.

 

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OPERATING PERFORMANCE

Group description

AngloGold Ashanti, a gold mining company with a globally diverse, world-class portfolio of operations and projects, is headquartered in Johannesburg, South Africa. AngloGold Ashanti is the third largest gold mining company in the world, measured by production.

Our portfolio of 17 operating mines in nine countries, comprises long-life, relatively low cost assets with differing ore body types located in key gold-producing regions. A number of these assets are strongly leveraged to energy costs and currencies.

Our operations are grouped regionally as follows:

 

South Africa (Vaal River, West Wits and Surface Operations)

 

Continental Africa (Democratic Republic of the Congo, Ghana, Guinea, Mali and Tanzania)

 

Americas (Argentina and Brazil)

 

Australasia (Australia)

These operating assets are supported by greenfield projects and a focused exploration programme.

In 2016, Obuasi was in care and maintenance and the closure process at Yatela continued. All other assets remained fully operational.

AngloGold Ashanti’s operations and joint ventures employed, on average, 52,649 people (including contractors) in 2016 (2015: 52,266).

Performance

In 2016, AngloGold Ashanti produced attributable 3.6 million ounces of gold (2015: 3.9 million ounces) as well as 810,000 pounds of uranium oxide, 5.2 million ounces of silver and 183 tonnes of sulphuric acid asby-products.

Production of 3.6 Moz was achieved at a cost of sales of $3.3 billion and a groupall-in sustaining cost of $986/oz compared to 3.8 Moz at $910/oz (from continuing operations) in 2015.

The attributable Ore Reserve at 31 December 2016 was 50.0 Moz, down from 51.7 Moz at 2015. This annual decrease of 1.7Moz includes depletion of 3.9Moz, which was partly offset by 3.4Moz of additions in Ore Reserve resulting from changes in economic assumptions between 2015 and 2016, exploration and modelling changes and other factors. See “Item 4D – Ore Reserves”.

Capital expenditure, including equity accounted joint ventures, in 2016 amounted to $811 million (2015: $799 million – excluding discontinued operations).

Safety

Regrettably, there were 7 fatalities across the group’s operations in 2016. The all injury frequency rate was 7.71 per million hours worked compared to 7.18 in 2015.

 

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SOUTH AFRICA

 

LOGO

AngloGold Ashanti’s South African operations comprise four deep-level mines and surface production facilities. They are:

 

The Vaal River operations – Kopanang and Moab Khotsong;

 

The West Wits operations – Mponeng and TauTona; and

 

Surface operations.

 

    Gold production
(000oz)
   

Average number of  

employees  

 

  Operations

 

        South Africa

    

  1.   Vaal River

    

        Kopanang

   91    4,055   

        Moab Khotsong

   280    6,310   

  2.   West Wits

    

        Mponeng

   254    6,105   

        TauTona

   146    4,723   

  3.   Surface operations(1)

   186    3,140   
           

 

(1) 

Includes MWS for purposes of this report. It is operated and managed as a separate cash-generating unit.

 

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South Africa Key Statistics

 

    Unit  2016  2015  2014  

  Operation

        

  Tonnes treated/milled

  Mt  39.6  36.8  38.4  

  Pay limit(1)

  oz/t  0.37  0.39  0.39  
  g/t  13.81  14.38  14.35  

  Recovered grade(1)

  oz/t  0.219  0.225  0.239  
  g/t  7.51  7.70  8.19  

  Gold production

  000oz  967  1,004  1,223  

  Cost of sales

  $m  1,041  1,083  1,324  

  Total cash costs(2)

  $/oz  896  881  849  

  All-in sustaining costs(2)(3)

  $/oz  1,081  1,088  1,064  

  Capital expenditure

  $m  182  206  264  

  Safety

        

  Number of fatalities

    6  9  4  

  AIFR

  Per million hours worked  12.02  10.81  11.85  

  People

        

  Average no of employees: Total

    28,507  28,325  29,511  

Permanent employees

    25,205  25,274  26,056  

Contractors

     3,302  3,051  3,455  

 

(1) 

Refers to underground operations only.

(2)

Total cash costs andall-in sustaining costs arenon-GAAP measures. For further information on thesenon-GAAP measures, see “Item 5A: Operating Results”.

(3)

Excludes stockpile impairments.

Performance in the South Africa Region in 2016

Production and costs

Production from the South Africa region was 4 percent down on 2015 due to the lower volumes mined, a result of safety-related stoppages, reduced levels of productivity and a decline in underground yield. The most significant grade decline was at TauTona. Overall, production lost by the South Africa region due to safety stoppages totalled 104,000oz in 2016, mostly at Kopanang, Moab Khotsong and TauTona.

At West Wits Mponeng delivered the best performance in the region, with a 16 percentyear-on-year improvement in production following the successful implementation of theso-called‘de-risk plan’, which effectively called for the withdrawal from certain mining areas where analysis showed elevated risk levels, and the establishment of critical infrastructure to support the ramp up in production from the below 120 level project area. Although mining of the higher grade areas declined, Mponeng’s production was augmented by high-quality mining practices and an improved mining mix. There were also fewer safety-related disruptions at Mponeng in 2016 compared to the previous year.

TauTona’s production was negatively affected by several incidents. A gravity-inducedfall-of-ground fatality early in the first quarter of the year halted development work in the affected section for most of the quarter while work was completed to modify and enhance the secondary support standards at all development ends. A significant seismic event in the Savuka section in April 2016, which caused two fatalities, led to the subsequent suspension of production in most of that section and the level 116 haulage (the access way to two new raise lines), which is expected to remain inaccessible until late 2017, if at all. In addition, a fatal underground locomotive accident in the third quarter resulted in operations being suspended for a prolonged period while steps were taken to improve procedures and ensure safe working conditions.

Production at the Vaal River operations remained largely unchanged at 371,000oz. A 10 percentyear-on-year increase in production from Moab Khotsong offset the decline at Kopanang. At Moab Khotsong, increased production was driven by higher volumes mined, additional face length availability, a 5 percent increase in the mine call factor and the higher underground grade mined during the year.

However, these increases in production were offset by issues at Kopanang, including safety-related stoppages in the second quarter of the year, lower volumes and a 6 percent decrease in grade mined. Lower volumes mined were attributed to lower efficiencies caused by face time constraints as mining is largely conducted at the extremities of the operation, causing significant travel times to production areas. To mitigate this, the mining cycle has been modified to allow for more efficient use of the limited face time available. The decline in underground grade was expected as the mining fronts move towards the lower grade western areas.

 

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While tonnage throughput for the year increased by 8 percent at Surface Operations, lower feed grades and recoveries resulted in decreased productionyear-on-year. Optimisation of the plant circuit to improve recoveries continued. Recommissioning of the uranium plant began in the third quarter with uranium production recommencing in August.

As stockpiles of high-grade, hard-rock material were depleted during the year, processing of lower-grade tailings increased, contributing to the decline in feed grades. This posed significant challenges to the operation. A blending strategy was initiated and in an effort to optimise the ratio of marginal ore dump and tailings material at the plant, and to mitigate the lower than anticipated grade fed into the Savuka plant. Additionally, a project was launched to screen and truck marginal ore from Moab Khotsong to further improve the grades.

The focus at all the South African operations was on identifying improvement projects to both rationaliseoff-mine costs and driveon-mine efficiencies. The consolidation of the region’s operations into three operating entities, to eliminate any duplication of services and management, is now complete and the resultant cost and efficiency benefits are evident. Project 500 cost saving initiative benefits helped mitigate the impact of lower production on costs and grade and had a positive impact on free cash flow.

Capital expenditure

Overall, capital expenditure in the region declined by 12 percentyear-on-year, due to the decline in the value of the rand. Capital expenditure in rand terms remained in line with 2015.

Safety

Regrettably, six fatalities occurred in the South Africa region in 2016. Four of these occurred at TauTona with two at the Savuka section followingfall-of-ground and tramming incidents. A further two fatalities occurred followingfall-of-ground related incidents at Kopanang.

Ore Reserve

As at 31 December 2016, the total Ore Reserve for the South African region was 25.1Moz (2015: 26.1Moz). This is equivalent to 50 percent of the Group’s Ore Reserve.

Growth and improvement

Mponeng

Phase 1 of Mponeng’s below 120 level project is in its productionbuild-up phase. Infrastructure development on 123 level progressed according to schedule with four raise lines holed during the year. Construction of capital infrastructure, execution of ore reserve development and logistical efficiency improvements all proceeded as planned. Ramp up to steady state ore reserve development is expected to begin in the second half of 2017, once ore handling infrastructure has been commissioned.

The Mponenglife-of-mine extension project – Phase 2 – will be advanced to feasibility stage with the related study scheduled to be completed bymid-2018. This follows concept and prefeasibility studies on a CLR extension project that were undertaken during 2016, the results of which were presented to the board early in 2017. Critical path activities will continue on the project throughout 2017.

 

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The project design intends to establish asub-vertical shaft extension to access the majority of the CLR and VCR ounces (excluding Phase 1) below the current 120 level through a single common infrastructure. This contrasts the phased approach previously envisaged to access the ore body via a series of ramp and decline extensions with independent focus on each of the ore bodies. Most of the revised approach to Phase 2 includes ramp up of development and other preparatory work for shaft sinking and access development. This phase of the project is expected to access six levels on the CLR and four levels on the VCR by means of a vertical shaft extension.

Phase 2 commissioning of the surface substation was completed by Eskom at the end of 2016 and other activities continued, including equipping of the inter-level ice hole, construction of the 116 level substation and the water handling infrastructure complex on 121 level.

Zaaiplaats

Initial development of project Zaaiplaats at Moab Khotsong was undertaken to facilitate exploitation of additional ore blocks adjacent and contiguous to current mining areas. The most important are the lower mine blocks (Zaaiplaats and areas A, B and C), located southwest of current mine infrastructure and extending below the existing mine. Over the past few years, the decline in the gold price, together with changes in key parameters and economic assumptions, reduced the economic viability of this project and it was placed on hold. While Zaaiplaats is included in Moab Khotsong’slife-of-mine plan and Ore Reserve base, it is currently the subject of a prefeasibility study.

 

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CONTINENTAL AFRICA

 

 

LOGO

AngloGold Ashanti has seven mines in the region, six of which are producing mines and processing operations, and five of which AngloGold Ashanti manages. Obuasi is in care and maintenance. Closure is underway at Yatela.

 

    Attributable gold production
(000oz)
   Average number of  
employees  
 

  Operations

    

 

 

  1.   Democratic Republic of the Congo

    

Kibali 45%

   264    2,180     

  2.   Ghana

    

Iduapriem

   214    1,576     

Obuasi

   3    766     

  3.   Guinea

    

Siguiri 85%

   260    3,509     

  4.   Mali

    

Morila 40%

   22    324     

Sadiola 41%

   70    588     

  5.   Tanzania

    

Geita

   489    3,748     

 

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Continental Africa - Key Statistics

 

    Unit  2016  2015  2014

  Operation

        

  Tonnes treated/milled

  Mt  28.2  27.2  29.9

  Pay limit

  oz/t  0.034  0.036  0.039
  g/t  1.175  1.233  1.345

  Recovered grade

  oz/t  0.047  0.053  0.054
  g/t  1.46  1.64  1.66

  Gold production (attributable)

  000oz  1,321  1,435  1,597

  Cost of sales

  Sm  1,331  1,347  1,636

  Total cash costs(1)

  $/oz  717  678  783

  All-in sustaining costs(1)(2)

  $/oz  904  815  968

  Capital expenditure

  $m  291  315  454

  Safety

        

  Number of fatalities

    0  1  0

  AIFR

  Per million hours worked  0.51  0.50  1.56

  People

        

  Average no of employees: Total

    12,691  11,942  16,070

Permanent employees

    5,331  5,061  8,739

Contractors

     7,360  6,881  7,331

 

(1) 

Total cash costs andall-in sustaining costs arenon-GAAP measures. For further information on thesenon-GAAP measures, see “Item 5A: Operating Results”.

(2) 

Excludes stockpile impairments.

Production and costs

Production in the Continental Africa region decreased 8 percent with increased production at Iduapriem, Siguiri and Sadiola offsetting production declines elsewhere in the region. The decreased productionyear-on-year is attributable to planned lower recovered grades at Geita as the first underground operations ramp up to commercial quantities at average resource grades; a setback from plant stability challenges that were encountered in first half of the year while dealing with multiple ore sources at Kibali; the transition to treatment of low grade tailings storage material in the latter part of the year at Morila; and no production at Obuasi, which transitioned to care and maintenance status.

At Kibali, production fell 9 percent from 2015, to 264,000oz in 2016. Kibali’s performance improved significantly in the second half of 2016 as the plant stability issues encountered in the first half of the year were resolved. Production increased 32 percent in the second half of the year over the first half due to improved plant throughput at higher metallurgical recoveries, following the introduction of satellite open-pits in the fourth quarter which provided higher grade material and greater flexibility in managing the multiple ore sources. The operational challenges encountered in the first half of the year occurred while testing both plant streams to run on sulphides as per the design specification, ahead of the depletion of oxide ore. A drop in recoveries was compounded by bearing failure on one of the ball mills, causing a sharp drop in production and a steep increase in costs. The introduction of the Kombokolo and Rhino satellite pits in the fourth quarter of the year also increased production towardsyear-end, by adding higher grades and improving mining flexibility. Kibali reported record tonnage throughput in the fourth quarter of the year.

At Iduapriem, production increased by 11 percentyear-on-year as a result of mining in deeper, higher-grade areas. This was accompanied by a 9 percent increase in tonnage treated from higher plant availability, compared to the previous year when the plant had an extended major shutdown to upgrade the semi-autogenous (SAG) mill. Throughput of 5.1Mt for the year was a record for the Iduapriem plant. Total tonnes mined increased by 28 percentyear-on-year to 28Mt in 2016 as the mine commenced a major waste stripping programme to access the ore sources in the Block 7&8 pit that would provide the foundation for the sustainability of the futurelife-of-mine. The improved performance is attributable to higher plant and mining fleet productivity as well as the efficiency gains stemming from major modifications and repair work completed in the milling circuit in the previous year.

Siguiri’s increase in production was boosted by higher tonnage treated, up 3 percent as the plant maintained consistent availability relative to the previous period. This was partly offset by a planned decrease in recovered grade in the first half of the year as lower grade stockpile material was processed whilst preparations for access to the Area 1 mining zone were being completed. Mining commenced in the higher grade Area 1 zone in the third quarter, with ramp up in the last quarter contributing significantly to increased production in the second half of the year.

 

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At Geita, although there was a 5 percent increase in plant throughput due to treatment of softer ore and improved plant availability through consistent maintenance of operations, production was down owing to a planned 12 percent decrease in recovered grade. This decrease was in line with the mining plan which introduced ore sourced from the initial underground operations at the Star & Comet mining area at lower than the average grades. Higher grades are expected to be realised as development progresses and commercial quantities are achieved.

Sadiola maintained production levels consistent with the previous year despite the limited mining flexibility as remaining oxide ore mining sources are depleted. The mine delivered the planned 5 percent increase in recovered grade, partly offset by a 3 percent decrease in tonnage throughput as a result of an increase in the treatment of transitional material. Tonnage throughput is flexed with a combination of the limited newly mined ore, marginal ore stockpile sources at lower grades and periodic drawdown from the higher, full-grade ore stockpiles. Plant operations were efficient and consistent, which provided the flexibility to maintain a steady quarterly production and revenue profile.

Morila completed the mining and processing of mineralised waste ore during the year and from the last quarter of the year has transitioned to a full tailings-storage material treatment operation which is expected to continue for the next two years, after which the mine will transition to full closure. Morila delivered a 23 percent increase in tonnage throughput during the year contributing 22,000oz, as a result of consistent plant availability and treatment of softer ore, which partially offset the decrease in recovered grade.

During 2016, AngloGold Ashanti consolidated its continuous improvement and operational review processes together with the various cost management initiatives under the umbrella of the ‘Operational Excellence’ programme, focused on delivering systemic and sustainable operational improvements and aimed at each operation rapidly progressing towards targetedall-in sustaining unit costs that reflect the inherent opportunity and value set within the operation.

Capital expenditure

Capital expenditure for the region was lower compared to 2015, with the reduction mainly due to cessation of work on capital projects at Obuasi and a reduction capitalised waste stripping at Geita as thecut-backs reached commercial production levels. The year’s capital expenditure at Geita included the purchase of a fleet of Caterpillar dump trucks for a scheduled retirement of the existing fleet which is nearing the end of its useful economic life.

It is expected that capital expenditure in 2017 will increase as stripping of waste rock begins from the Teberebie ore body to extend the mine life at Iduapriem; the Siguiri mine begins constructing the Combination plant and associated power plant; underground production isramped-up at Geita while the mine’s20-year old power plant is replaced; and additional ore reserve development is conducted ahead of aramp-up in underground production at Kibali.

Safety

2016 saw a slight regression in safety performance from the record performance recorded during 2015. In terms of numbers, the Region equalled its 2015 performance of 16 recordable injuries during the year. However, due to a 4 percent reduction in the number of hours worked across the region, an increase of 2 percent in the all injury frequency rate (AIFR) from 0.50 in 2015 to 0.51 in 2016, has been realised. Notwithstanding this regression, safety performance in the Continental Africa region has improved over the last three years with injury rates improving approximately 80 percent since 2013. Four of the 16 injuries were classified as lost-time injuries, with a lost-time injury frequency rate (LTIFR) of 0.13 injuries per million hours worked, which compared favourably against the rate of 0.22 recorded for 2015.

Ore Reserve

The total attributable Continental Africa Region Ore Reserve was 17.8 million ounces (2015: 19.3 million ounces). This amounts to 37 percent of the group’s Ore Reserve.

 

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Growth and improvement

The Convention de Base, an extension of the stability agreement between AngloGold Ashanti and the Guinean government, was ratified by the government in January 2017, following access to Area 1 mining zone which was secured in June 2016. The Hard Rock Combination Plant Project, for the expansion and conversion of the processing plant infrastructure will now commence. This will facilitate the processing of harder sulphide ore thereby extending the mine life, lowering costs and increasing production while also improving exploration potential in the area surrounding the mine. Allied to the mine-life extension project capital has also been approved for the construction of an owner- operated 39MW power plant, which will secure the future power requirements of the mine at lower power unit cost, and further lower the unit costs for the mine.

The updated feasibility study for the mining and treatment of sulphide ores at Sadiola, expected to increase processing plant throughput, lower costs and extend mine life, has been completed with our joint venture partner IAMGOLD. Further work on the project is subject to requisite government approvals, agreements and permits. Discussions are currently underway with ministries of the government of the Republic of Mali with a view to expeditiously achieving these approvals. Capital expenditure for this project is now expected to be $410 million (100 percent) over 2 to 3 years.

Geita has successfully transitioned to underground mining the Star & Comet mining area. The first full year of underground commercial production will be during 2017 and this will supplement production fromopen-pit ore sources. Preparatory work to access the Nyankanga underground resource has been completed and blasting operations will begin in 2017. Permitting for Nyankanga was obtained from the government of Tanzania in early 2017. The long-term strategy for Geita is to extend the mine’s life by extracting the resources utilising bothopen-pit and underground mining methods. In 2017, the Company plans is to also replace the mine’s original20-year-old power plant to ensure reliable power supply.

At Iduapriem, plans are underway for an extensive waste stripping campaign at the Teberebie ore body to extend mine life, increase production levels, and lower costs. Major cutbacks commenced at blocks 7 and 8 pit in early 2017. In addition to the waste mining plan, regulatory permits have been obtained for exploratory work at the Nueng pit and to explore for high-grade,low-strip ratio ore bodies within the concession, with a view to further drive costs down and improve efficiencies and margins. To improve plant recovery, the current CIP leaching and adsorption circuit configuration is being modified to a hybrid CIP circuit configuration with commissioning scheduled for the second quarter of 2017.

At Kibali, after reaching a depth of 751.2m with shaft sinking and having completed equipping of the shaft, the focus over the second half of 2016 was onoff-shaft underground development, which achieved 780m. First ore from the shaft is expected by the fourth quarter of 2017. At the Ambarau hydropower plant, commissioning commenced in February 2017, with first power now scheduled for the first half of 2017, with a 12MW capacity. The Azambi hydropower plant, the third to be built at the mine, was about 10 percent complete by the end of 2016 and on track to be completed in 2018. This will provide Kibali with 42MW hydropower capacity at much reduced costs relative to thermal power. Off shaft development of the crusher and materials handling system was on track for commissioning of ore in the second half of 2017. With the commissioning of ore production from the shaft, this will bring an end to Kibali’s initial project scope and capital. A new pit was opened at Kombokolo, as mining progressed at Pakaka and Mengu Hill. Plant modifications to add four fine-grinding mills and expand the pump cell circuit are on schedule for commissioning in the second quarter of 2017.

Obuasi – An Update

In early February 2016, the military contingent that had provided security to Obuasi since March 2013, in terms of an agreement between Ghana’s military and members of the country’s Chamber of Mines, was withdrawn from the site. No reason was given for the withdrawal and Obuasi was the only operation affected among dozens of other mines which enjoy this form of security. Shortly after the withdrawal, the site was invaded by hundreds of illegal miners who immediately began mining activities in the northern part of the concession. Police were unable to repel these miners.

Following the incursion of hundreds of illegal miners inside the fenced area of the Obuasi mine site, AngloGold Ashanti was forced to declare force majeure and, in the interests of safety, withdrew all employees performingnon-essential work on the site. However, we continued with provision of critical services, such as water pumping and treatment, medical services and the provision of electricity (including to some local communities).

AngloGold Ashanti has, during this incursion, continued to lobby vigorously at all levels of government for the authorities to bring a peaceful end to the illegal occupation of parts of its concession by these illegal miners, and restore AngloGold Ashanti Ghana’s rights as the lawful and sole permit holder of the concession.

 

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On 8 April 2016, AngloGold Ashanti Ghana filed a Request for Arbitration with the International Centre for Settlement of Investment Disputes (ICSID). The case was registered on Monday, 2 May 2016. ICSID is an international arbitration institution, headquartered in Washington, D.C., which facilitates dispute resolution between international investors and host states. The relevant authorities in Ghana, including the Attorney General, were duly notified of the commencement of proceedings.

In May 2016, the Ministry of Lands and Natural Resources implemented the voluntary process, which had commenced in November 2013, to surrender some 60 percent of the Obuasi mine concession to the Government of Ghana. This relinquished concession will provide an opportunity for the Government/ Ministry of Lands and Natural Resources to use the land as it sees fit, including to encourage a range of socio-economic development activities in the Obuasi region. The area covers about 273km2and excludes the Obuasi mine, which lies on land retained by AngloGold Ashanti Ghana.

In further developments, a directive to clear the site of illegal mining by 10 October 2016 was given by the Minerals Commission which, along with a multi-stakeholder committee it established, prepared alternative sites off the company lease for the miners to relocate to. At its peak, an estimated 12,000 illegal miners operated across the previouslyfenced-off area of the site.

On 18 October 2016, the Security Task Force took the first concerted steps to restore safety and security at the Obuasi concession. At each step along the way, AngloGold Ashanti Ghana petitioned authorities to ensure that the process of clearing illegal mining activity from site was done with deference to the Voluntary Principles on Security and Human Rights.

All areas within our fenced operational area have been cleared of illegal miners, and all identified illegal mining holes within the fence have been closed. Following a review of the safety, surface and underground conditions we have notified the Ghanaian authorities that the circumstances that led to the declaration of force majeure no longer existed and as such lifted the force majeure in February 2017. Work continues to completely remove the illegal mining activities within the Obuasi concession area. Only once that process is complete, and the feasibility study for the redevelopment of the mine has been updated with the relevant information, will the company be in a position to outline its plans for Obuasi. We are currently preparing a new Amendment to Programme of Mining Operations and will review all future options.

 

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AUSTRALASIA

 

LOGO

 

    Attributable gold production
(000oz)
   Average number of  
employees  
 

  Operations

    

  Australia

    

  1.   Sunrise Dam

   228    422   

  2.   Tropicana 70%

   292    503   

AngloGold Ashanti’s Australasian assets comprise the wholly owned Sunrise Dam and the 70 percent-owned Tropicana Gold mine, Australia’s newest gold mine. Tropicana completed its second full year of production in 2015.

Australasia - Key Statistics

 

    Unit   2016   2015   2014 

  Operation

        

  Tonnes treated/milled

   Mt    8.9    8.2    7.8 

  Pay limit

   oz/t    0.06    0.06    0.07 
   g/t    1.86    1.85    2.29 

  Recovered grade

   oz/t    0.058    0.068    0.078 
   g/t    1.82    2.12    2.43 

  Gold production (attributable)

   000oz    519    560    620 

  Cost of sales

   $m    540    525    660 

  Total cash costs(1)

   $/oz    793    702    804 

  All-in sustaining costs(1)(2)

   $/oz    1,067    875    986 

  Capital expenditure

   $m    109    78    91 

  Safety

        

  Number of fatalities

     0    0    0 

  AIFR

   Per million hours worked    9.49    8.56    10.73 

  People

        

  Average no of employees: Total

     925    836    832 

Permanent employees

     211    195    194 

Contractors

        714    641    638 

 

(1) 

Total cash costs andall-in sustaining costs arenon-GAAP measures. For further information on thesenon-GAAP measures, see “Item 5A – Operating Results”.

(2) 

Excludes stockpile impairments.

 

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Production and costs

A planned decrease in head grades at Tropicana impacted the region’s total production for the year, which although within guidance, ended lower than the previous year. Sunrise Dam however delivered a 5 percent improvement in outputyear-on-year, largely due to increased mill throughput and improved head grades.

At Sunrise Dam, mining transitioned from the GQ ore body into the Vogue ore body during the year, with the Dolly and Cosmo ore bodies also contributing significant mill feed. Underground ore was the primary source of mill feed and underground ore mined of 2.8Mt was higher in 2016 than in 2015. Underground ore is blended with intermediate grade of 1.45g/t stockpiled ore (accumulated during open pit mining) to meet the processing plant capacity, which reached 4Mt in 2016.

Underground ore production continued to improve, achieving a record annualised rate of 3.3Mtpa in the fourth quarter of 2016 as the 800,000t Dolly stope was brought into full production. This continues the improvement in productivity in the underground mine with the shift to bulk mining methods.

Tropicana again achieved the annual guidance given at the start of the mine for 2016, producing a total of 417,000oz, 292,000oz of which is attributable to AngloGold Ashanti. Gold production was 15 percent lower in 2016 than in 2015 due to the planned decrease in the average head grade for the year from 2.48g/t to 2.10g/t. This is consistent with the grade streaming strategy that involved preferential treatment of higher grades in the first years of the mine’s production, gradually declining to thelife-of-mine head grade of approximately 2.0 g/t. During 2016 low and medium grade ore was stockpiled.

The lower grades mined in 2016 were partially offset by an increase, to 6.9Mt (2015: 6.2Mt) of throughput in the processing plant as the plant optimisation project was completed towards year end. This project, which was introduced as a strategy to address the planned decline in production following the end of grade streaming, has successfully lifted design throughput capacity of the processing plant to 7.5Mtpa. Metallurgical recoveries remained steady at approximately 89 percent, andmine-to-mill reconciliation, for both tonnes and grades, continued to align well. Mining was carried out in the Tropicana, Havana and Boston Shaker pits during 2016.

Cost of sales, total cash costs andall-in sustaining costs for the region increased due to a stronger Australian dollar against the US dollar, planned lower production at Tropicana and increased mining spend at Sunrise Dam, where a third jumbo was added to the fleet to set up new mining areas and carry out decline development, as well as contributing to the additional ore tonnes mined. ‘Operational excellence’ initiatives resulted in significant productivity improvements and a reduction in mining unit costs. This work will continue in 2017. Additionally, in the last quarter of 2016, a Caterpillar 6060,600-tonne class shovel was introduced to the open pit mining fleet at Tropicana to increase mining rates to an annualised rate of 80Mtpa and to better match the higher throughput requirements of the processing plant.

Capital expenditure

Overall, capital expenditure in the region increased, primarily due to increased waste stripping in the Tropicana 2 cutback. Also at Tropicana the processing plant optimisation project was successfully completed during the year.

At Sunrise Dam capitalised mining spend increased in 2016 with the addition of an extra jumbo, which commenced on site in June, increasing the mining fleet from two to three jumbos. The jumbo will open up new mining areas and is focussed initially on capitalised decline development.

Stay-in-business capital spend at Sunrise Dam is expected to rise in 2017 with the construction of the flotation and ultra-fine grind circuit to improve gold recovery.

Safety

The region’s safety performance remains strong. Again there were no fatalities during the year, while the AIFR was 9.24 per million hours worked. The severity rate, a measure of time lost due to injury, is low at both operations indicating the minor nature of the injuries.

Ore Reserve

At the end of 2016, the total attributable Ore Reserve for the Australasia Region was 4.0 million ounces (2015: 3.1 million ounces). This makes up around eight percent of the group’s Ore Reserve.

 

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Growth and improvement

Throughout 2016 a study has been carried out on a recovery enhancement project at Sunrise Dam. The presence of moderate levels of refractory sulphide ores has led to recoveries averaging around 85 percent over the mine’s19-year life. To date, the study work indicates that a significant improvement in recovery can be achieved through the addition of a flotation/ultra-fine grind circuit. The study is scheduled for completion in the first quarter of 2017 after which approval for the project will be sought.

Work is also continuing on a materials handling system to underpin the long-term viability of the underground mine. This project involves underground crushing and conveyor haulage of ore to the surfacerun-of-mine pad. Should it prove viable, it will reduce material rehandling and truck haulage costs, enabling the Company to mine the ore body by loweringcut-off grades and maximising production rates.

At Tropicana the higher mining and throughput rates introduced in late 2016 will enable the resumption of grade streaming frommid-2017 for at least two years. This is expected to increase production to the annual guidance of between450,000-490,000oz (at 100 percent) from the second half of 2017.

Work is continuing on the Long Island study, which is investigating large cutbacks to the pits utilisinglow-cost mining options. These include strip mining the depth extensions to the Tropicana mineralised system and using the completed Tropicana pit as a void into which waste will be backfilled. The proposed backfilling of the Tropicana pit, in conjunction with strip mining, is expected to reduce the cost of mining waste significantly by introducing short horizontal hauls instead of requiring the long uphill hauls out of the pit to surface waste dumps that would be required by conventional mining.

It is anticipated that the study will be completed inmid-2017. If the proposed mining method is implemented, the initial Long Island cutback would begin in 2019 when the Tropicana pit has been mined to its full depth. An extensive 161,000m programme of reverse circulation and diamond drilling carried out in 2015 and 2016 resulted in a 45 percent increase in the mine’s Ore Reserve and a 27 percent, or 1.73Moz, increase in the Mineral Resource, as at 31 December 2016. The increase in the Mineral Resource was achieved largely through significant additions in the Havana South and Boston Shaker zones following application of the Long Island mining methods and costs, and through an increase to the underground Mineral Resource along the entire strike length of the Tropicana mineralised system. Further increases are anticipated in 2017, depending on the outcome of the Long Island study.

Towards the end of 2016, AngloGold Ashanti entered into afarm-in agreement with Saracen Mineral Holdings Ltd to earn up to 70 percent in Saracen’s Carosue Dam North tenements. The joint venture encompasses two tenement packages, Butcher Well and Lake Carey, covering 339.56km2, approximately 120km to the north of Saracen’s Carosue Dam project. Field work, including the first phase of drilling at Butcher Well, will begin in the first quarter of 2017.

 

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THE AMERICAS

 

LOGO

AngloGold Ashanti has three mining operations – both open pit and deep level mining – in the Americas region. In addition, there is an active greenfields exploration programme underway in Colombia.

 

 

 
   Attributable gold production
(000oz)
   Average number of  
employees  
 

 

 

  Operations

    

  1.     Argentina

    

         Cerro Vanguardia 92.5%

   281    1,877   

 

 

  2.    Brazil

    

         AGA Mineração

   407    4,662   

         Serra Grande

   131    1,587   

 

 

  3.    Colombia – exploration programme

    

 

 

 

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Americas - Key Statistics (1)

 

    Unit        2016        2015        2014   

  Operation

              

  Tonnes treated/milled

   Mt      7      7      6.8   

  Pay limit

   oz/t      0.100      0.098      0.092   
   g/t      3.421      3.351      3.152   

  Recovered grade

   oz/t      0.106      0.108      0.104   
   g/t      3.64      3.71      3.58   

  Gold production (Attributable)

   000oz      820      831      785   

  Silver (attributable)

   Moz      4.9      4.4      3.1   

  Cost of sales

   $m      752      719      745   

  Total cash costs (2)

   $/oz      578      576      676   

  All-in sustaining costs (2)(3)

   $/oz      875      792      974   

  Capital expenditure (4)

   $m         225         196         225   

  Safety

              

  Number of fatalities

       1      1      2   

  AIFR

   Per million hours worked      3.96      5.61      3.81   

 

 

  People

              

  Average no of employees: Total

       8,126      7,679      8,588   

Permanent employees

       5,653      5,492      5,944   

Contractors

       2,473      2,187      2,644   

 

 

 

(1) 

Key statistics are for the continuing operations in the region and exclude CC&V which was sold effective 3 August 2015.

(2) 

Total cash costs andall-in sustaining costs arenon-GAAP measures. For further information on thesenon-GAAP measures, see “Item 5A: Operating Results”.

(3) 

Excludes stockpile impairments.

(4) 

100 percent, (not attributable) and includes Colombia

Production and costs

Production from the Americas region declined in 2016, due to lower output from the Brazilian operations. AGA Mineração was negatively affected by delayed access to certain high-grade stopes early in the year, a deficit in secondary development, ongoing geotechnical and support challenges, licensing delays and geological modelling issues. Production was also negatively impacted by a fatal accident in late September.

The mine plan has been amended and is expected to help the operations deliver improved performance going forward. The revised mine plan comprises the treatment of additional ore from lower-grade zones, with higher tonnages helping to offset the lower grades.

At Córrego do Sítio, despite a 2 percent increase in tonnages treated from both the oxide and sulphide operations, overall production was impacted by reduced grades from the main underground ore body, a deficit in secondary development and a longer-than-planned stoping cycle.

At Serra Grande, delays in the award of permits required for the Corpo Sul open pit, along with geotechnical challenges affecting the ramp to access high-grade areas at underground Mina Nova in the Pequizão ore body, had a negative impact on operations.

Cerro Vanguardia delivered an increase in production, achieving the highest level in 17 years, due to an increase in tonnes treated at the plant together with operational and metallurgical improvements. This positive performance was partially offset by lower grades mined, owing to variability in the mining model.

As the region continued to focus on cost management and production improvements resulting from the Project 500 efficiency programme, costs remained virtually unchanged. This was achieved despite lower production and significant inflationary pressures, including annual salary increases. In Brazil, costs were mainly affected by higher capital expenditure.

In Argentina, costs were favourably impacted by the reimbursement by the government of Argentina relating to exports through Patagonian ports. Cost management initiatives at Cerro Vanguardia resulted in savings derived from higher mill throughput and silver recovery; reduced use of consumables; negotiated price reductions for key inputs such as ammonium nitrate, grinding media; gold refining services; cost reductions in open pit mining; backfilling of depleted pits and improved maintenance of heavy mining equipment.

 

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Capital expenditure

Capital expenditure for the region increased by 15 percent over 2015 levels, and was mostly spent in Brazil to increase ore reserve development in order to improve mine flexibility at all operations, raise tailings dam at Cerro Vanguardia and Mineração, and convert the metallurgical leaching process at Serra Grande.

At Cerro Vanguardia, capital expenditure was lower compared to 2015 mainly due to lower deferred stripping and the underground expansion project executed in 2015 and not repeated in 2016, which was partially offset by higher capitalised ore reserve development related to higher underground production. The depreciation of the Argentinean peso against the US dollar also aided the reduction in dollar-denominated expenditure.

The region’s capital expenditure is expected to increase in 2017 as Cerro Vanguardia focuses on site exploration to extend the mine life; Mineração accelerates ore reserve development at the Cuiabá complex and evaluatesore-sorting prototypes at the CdS complex; and Serra Grande develops the high-grade Palmeiras and Inga ore bodies, to increase production and extend mine life.

Safety

At the Cuiabá complex, there was a fatal accident in September when one of our contractors’ employees was fatally injured in a heavy mobile equipment accident. In order to reinforce contractor safety behaviour, the mine will standardise the safety practices for all contractors to be aligned with AngloGold Ashanti’s policies and practices.

Ore Reserve

At the end of 2016, the total attributable Ore Reserve for the Americas Region, was 3.1 million ounces (2015: 3.2 million ounces). This makes up around six percent of the group’s Ore Reserve.

Growth and improvement

At Mineração, additional development work is underway to improve mining flexibility; implementation of ore sorting prototypes is planned; and a new pushback at the open pit at Córrego do Sítío is being studied.

Work began at Cuiabá on the ventilation and transportation systems, for operating at depths between 1,500 to 2,500 metres from 2020 while doing the necessary work to ensure stable production levels in the interim. The drilling campaign at Córrego do Sítío aims to confirm the ore sources that will help improve production in the medium term and extend the life of mine from a new open pit (CdS III) and new underground mines at the Mina II and São Bento Deep ore bodies.

At Serra Grande, exploration work is delivering positive results for future production improvements while negotiations continue with owners of Palmeiras Sul ahead of accelerating exploration to confirm the area’s potential. Diamond directional drilling underground proved the continuity of current structures with the new Inga ore body to begin production in 2017. A new open pit pipeline is in place while drilling campaigns are underway at the Pequizão orebody. Exploration at current structures is delivering positive results and new positive drill holes are delineating a new orebody (Mangaba) at structure IV.

At Cerro Vanguardia, the underground expansion continues according to schedule, following the initiative launched in 2015 to accelerate open pit and underground operations for optimisation oflife-of-mine economic performance and increase production over the coming five years.

In Colombia,pre-feasibility evaluation work continued throughout 2016 with the Gramalote and La Colosa projects and these studies are expected to be completed by the end of 2017 andmid-2018 respectively. The Nuevo Chaquiro project successfully completed a conceptual study and the approval to advance topre-feasibility phase will be sought during 2017. Greenfields exploration activities were slowed down in 2016 although field activity continued all year at the Guintar prospect.

 

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EXPLORATION REVIEW

Our exploration is focused on creating value by providing long-term optionality and improving the portfolio quality. The objectives are met by:

 

 

Greenfields exploration, which aims to discover large, high-value Mineral Resources that will eventually lead to the development of new gold mines. Our greenfields exploration team was recognised by a leading industry research group, in 2015 as the industry’s most successful in Mineral Resource discovery. The team has a proven track record that includes the discovery of world-class ore bodies at La Colosa, Gramalote, Tropicana and Nuevo Chaquiro. These discoveries are attributed to our committed and professional team of geoscientists working on a portfolio of highly prospective and rigorously prioritised greenfields ground holdings.

 

Brownfields exploration, which focuses on delivering value through incremental additions to our Ore Reserve in existing mines as well as new discoveries in defined areas around existing operations. Brownfields exploration actively drives the creation of value by growing our Mineral Resource and Ore Reserve, our major assets. Our brownfields exploration programme is based on innovative geological modelling and mine planning and continual optimisation of our asset portfolio.

Greenfields exploration

Greenfields has over 9,000km2 of highly-prospective ground in three countries; Australia, Colombia and Brazil, and also has small ground positions in Tanzania, the USA and Argentina. Greenfields also initiated focused generative activities in countries with operational synergies.

InAustralia, in the Laverton district, aircore (AC) drilling was completed over numerous AngloGold Ashanti-held targets with 617 holes drilled for a total of 40,719m. Drilling encountered strong carbonate-sericite ± silica alteration with minor pyrite or arsenopyrite in several holes with brecciated quartz veins also observed. Several encouraging results from both Ahab and Pioneer were received. The positive AC samples from Pioneer werefollowed-up by six reverse circulation (RC) holes with three diamond drilling (DD) tails (702m/471m) and results of this drilling will be available in early in 2017.

In the fourth quarter of 2016 the Butcher Well and Lake Careyfarm-in agreement was signed between AngloGold Ashanti and Saracen Mineral Holdings Limited. AngloGold Ashanti has acquiredearn-in rights for 340 km2 of tenements on and along the western margin of Lake Carey in the Laverton district of Western Australia, including those hosting the historically-mined Butcher Well gold deposits. AngloGold Ashanti can earn up to 70 percent of the JV by spending A$15 million within 48 months from commencement date to earn 51 percent and a further A$10 million within 24 months thereafter to earn 70 percent. The conditions precedent for the agreement were met on 22 December 2016, and the first phase of drilling at Butcher Well is expected to commence in the first quarter of 2017.

At the Strawbridge Project in Western Australia, the planned AC drilling programme was completed with 257 AC holes drilled for a total of 12,770m. Results at Strawbridge from the AC drilling and geochemical sampling in 2016 returned no significant results.

InColombia, drilling was completed at the Guintar project (AngloGold Ashanti 100 percent) situated 40km west of Medellin. Three DD holes for 1,219 m were drilled on epithermal targets above a potential buried porphyry.

Several narrow(2-6m) intervals of anomalous gold mineralisation >1g/t were intersected. Are-evaluation of the regional geology at Guintar, identified subtle multi-element epithermal signatures in gravels associated withN-S trending graben structures.Follow-up exploration at this new target, Nuevo Guintar, indicates a potentially preserved epithermal target. Detailed mapping, soil sampling and ground geophysics was completed to delineate drill targets.

InBrazil, Greenfields signed a newfarm-in and JV agreement with Luna Gold to explore a ~2,000km2 tenement package, located in the Maranhão state of Brazil. Under the terms of the agreement, AngloGold Ashanti can spend $14m over four years to earn a 70 percent interest in the tenements, which includes a minimum commitment of $2m. The JV officially initiated in August and regional mapping and soil sampling programmes were completed.11 200km of a high resolution aeromagnetic and radiometric survey were flown. In parallel, considerable effort has also been placed on obtaining environmental permits for planned drilling expected to start in the first quarter of 2017.

InTanzania,Guinea,Argentina and theUnited States, early stage grassroots evaluation and reconnaissance programmes progressed.

 

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Brownfields exploration

Brownfields exploration was carried out in ten countries, in and around AngloGold Ashanti operations. A total of 656,350m of DD and RC drilling was completed during the year.

South Africa: Exploration in the South Africa region continued with three holes being drilling at Mponeng’s Western Ultra Deep Levels (WUDLs). Surface drill holes UD59, UD60 and UD58A all intersected the VCR during the year with only UD58A continuing to drill as it completes its short deflection programme. UD61 and UD63 will start in 2017.

Argentina: At Cerro Vanguardia, drilling programmes for Mineral Resource creation and delineation continued during the year with focus on delineating vein extensions along strike and at depth in the Cerro Vanguardia tenements. Mapping, trenching and channel sampling continued as part of the reconnaissance programme to identify new drilling targets. In 2016, a new explorationearn-in project started in the Claudia concessions located to the south of the mine. Work completed at Claudia included mapping, sampling, geophysics, and initial phase drilling RC and DD drilling.

Brazil: In the Iron Quadrangle, the underground drilling programmes for depth extension related Mineral Resource conversion continued at both the Cuiabá and Lamego mines. At Cuiabá, additional drilling was directed toward satellite mineralisation bodies that may be accessible from existing infrastructure. The surface drilling programmes at the Córrego do Sítío mine continued to infill and expand oxide Mineral Resource while the underground programme added extensions to several orebodies.

At Serra Grande, exploration drilling continued to delineate the Inga mineralised structure. A new mineralised structure called Mangaba was discovered during the year through underground drilling and will be followed up. Geophysical surveys and soil sampling campaigns continued as part of the target generation program for the district.

Colombia: Exploration in the Gramalote area continued with programmes in and around the Gramalote Central deposit to complete infill drilling on the saprolite horizon. Limited drilling programmes were also conducted within the joint venture area.

At La Colosa, the emphasis on other project related drilling continued with support to geotechnical, hydrological and site infrastructure studies.

The Quebradona project work was directed toward metallurgical and infrastructure drilling studies during the year.

Tanzania: Drilling activities included infill drilling at Nyankanga Block 5 UG (Cut 9), Nyankanga Cut 7/8, Star & Comet Cut 3, Geita Hill East Cut 2, and Mineral Resource delineation drilling at Star & Comet UG (Cut 2 and 3) and Geita Hill East UG. A total of 28,574m exploration drilling was completed, comprising 10,783m DD from surface, 10,407m underground DD, and 7,383m RC drilling.

Routine geological pit mapping continued at Nyankanga Cut 7 and 8, Geita Hill East and West as well as Star & Comet Underground. In addition, a review of the preliminary geological interpretations of Kukuluma and Matandani was conducted. Detailed mapping was also conducted at Selous, ahead of planned drill-testing of this target.

The 3D Seismic Survey data acquisition within the central Geita area was successfully and an interpretation session of the initial processed data was conducted during December. A final interpretation and targeting session on site is planned for the first quarter of 2017.

Guinea: Exploration drilling focused on infill and reconnaissance drilling at Seguelen, Bidini, Tubani, Kami, Silakoro, Soloni, Kalamagna PB2, Boukaria West and Balato NE. A total of 56,975m was drilled during the year, comprising 3,336m DD, 7,894m RCDD, 43,714m RC, and 3,030m AC drilling. Other exploration activities included geochemical soil sampling, geometallurgical investigations, and the completion of LIDAR and airborne geophysical surveys.

Ghana: No exploration was conducted at Obuasi. Exploration at Iduapriem focused on infill drilling at Block 7&8, Mineral Resource delineation drilling at Block 4S and reconnaissance drilling at the Bankyem (Block 1 East), Block 1 West, Mile 5 and Nueng targets. A total of 11,316m was drilled, comprising 8,275m DD and 3,041m RC. Soil geochemical surveys were also completed over various target areas as part of a lease-scale programme.

Democratic Republic of the Congo: Drilling at Kibali totalled 28,110m, of which 19,434m was mine based drilling and 8,677m was on regional targets. DD drilling comprised 6,660m with the remaining 21,450m being RC drilling. The exploration aimed to fulfil three main objectives: MineralResource-Ore Reserve replacement, potential oxide displacement ounces, and identify and develop new targets.

 

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Mine based exploration took place at the Rhino-Agbarabo-Kombokolo area, Pakaka, Pamao, Tete Bakangwe, Kanga Sud, Ndala Village, Aerodrome and Sessenge Southwest, regional exploration was focused on the Kalimva-Ikamva targets in the north, Memekazi Ridge, and the Aindi Watsa-Dilolo-Zambula targets in the south.

Mali: A total of 21,383m of exploration drilling was completed at Sadiola, comprising of 20,671m RC and 712m DD. Reconnaissance drilling for oxides concentrated on FNa,FNb-c and FN3 along the Sadiola North East mineralisation trend, FE2S, Voyager East and FE1W. While infill and deeper Mineral Resource delineation drilling targeted primarily SSP North and Tambali in support of the Sadiola Sulphide Project (SSP).

Australia: Underground Mineral Resource development drilling continued at Sunrise Dam throughout the year. Exploration DD focused primarily on increasing Indicated Mineral Resource (primarily in Vogue South), Reconnaissance drilling in Vogue Deeps and Mineral Resource creation drilling in the Carey Shear. Underground RC drilling continued to focus on converting the Indicated Mineral Resource into a minable Grade Control block model for use in stope development designs. Key DD drilling platforms are being developed, which will be used over the life of mine to drill test exploration targets along the strike length of the deposit.

At Tropicana, the Long Island 100m x 100m drilling programme to test the strike extent anddown-dip extensions of the known mineralised system at Tropicana was completed during December, 2016. In the second half of 2016, additional closer spaced drilling was undertaken at Boston Shaker to achieve Indicated Mineral Resource classification, and minor infill drill programmes were completed at Tropicana, Havana and Havana South. A total of 35,618m of RC and 55,516m of DD drilling were completed.

Regional brownfields exploration based out of TGM consisted of AC, RC and DD drilling totalling 50,083m. In detail, this consisted of 29,927m of AC, 9,971m of RC and 3,852m of DD drilling. A number of encouraging Au assay results were intercepted from RC and AC drilling at the Sanpan, Voodoo Child, Madras, Angel Eyes, Paradise and New Zebra prospects, with results at the newly established New Zebra prospect particularly significant. Drilling at Tumbleweed did not produce significant results.

Data from the seismic survey completed over the Crouching Tiger and Havana South areas merged with the 2014 Tropicana-Havana seismic survey. Currently work is focusing on interpretation of the merged seismic survey model to identify potential strike anddown-dip extensions to the Tropicana gold system. A significantre-interpretation of the structural architecture of the belt was developed and delivered a considerable pipeline of exploration targets.

TECHNOLOGY AND INNOVATION

The progress that the Technology Innovation Consortium made in 2016 and the highlights of the project are set out below:

Reef Boring - Small Range:

In 2016 the Sandvik/Cubex machine was commissioned at the Savuka section of the mine but due to challenges faced during the stage gate reviews, the programme had to be discontinued and the machine will be decommissioned.

Medium Range:

MK IV Machine Test Site

During 2016 the MK IV machine was commissioned in the test site and has drilled 23 holes, with four holes drilled in the fourth quarter of 2016. It was determined that the quality of the holes regressed due to the self-pinning cylinders failing during the drilling cycle. This caused the machine to veer off the planned trajectory. Several new designs were investigated with the OEM Atlantis and improvements are ongoing. The addition of active sensors/pegs verified the potential of the machine to orientate, locate and direct itself to the next drilling position.

A decision was made to designate the MKIV for all research and development trials and to ensure that design targets are met on this proto-type machine prior to any further reef boring machine purchases taking place. These trials will include the results from the integrity test and furthermore improvements on the active peg system, hydro-transport, self-pinning cylinders and in hole cleaning. A structural integrity test was conducted by a company specialising in this field of work to determine the integrity of the machine with the report scheduled for finalization in the first quarter in 2017, upon which decisions regards potential alterations or design changes will be made.

 

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MK III Machines

Carbon Leader Reef (CLR) prototype site

Drilling continued with three MK III machines in the CLR block, machines drilled 33 holes in the first half of the year. At the end of the second quarter, geotechnical concerns resulted in a revised extraction strategy that resulted in the loss of some current mining ground and consequently the reduction of one machine.

Ventersdorp Contact Reef (VCR) prototype site

After a premature failure of the 980mm reamer, a decision was made to continue drilling with the 660mm reamer. Work will continue to enhance the design of the 980mm reamer. Seven holes were drilled in the fourth quarter of 2016.

During the year, an MK III machine was installed in the VCR site and drilling commenced in third quarter after commissioning. The usual teething problems associated with a commissioning process were resolved.

Work will continue at both sites in a stage gate approach. The aim is to achieve consistent performance to prove the economic viability of the project.

Ore Body Knowledge and Exploration

The goal in 2016 was to improve accuracy of the Sandvik/Cubex machine. Analysis indicated that the drilled holes followed a similar trend implying that a correction factor could be applied to ensure an accurate end point is reached. The drilling trials with the Bohrmeisterfit-for-purpose drill rig commenced in the fourth quarter after it’s commissioning at TauTona mine. The first stage gates were met after drilling four holes at the set drilling target rate (8m/hr) and hole depth (100m) at different inclinations. After the compressor started losing pressure the trial was stopped for repairs on the unit. This machine was replaced with the fit for purpose Bohrmeister drill rig during the fourth quarter.

Drilling for the next stage will commence in the first half of 2017. This stage will aim to improve on the accuracy of the drilled holes. In hole surveying of these holes for data collection remains a technical challenge and design modifications on the deployment mechanism is currently underway.

Ultra-High Strength Backfill

To date, two ultra-high strength backfill (UHSB) plants were successfully commissioned; one plant at the CLR site and the other at the VCR site at TauTona mine. These plants are in full operation and have the capabilities of mixing the dry tailings underground with the other ingredients, thereafter pumping the final product at 4m³/hour over a distance of 600m.

Engineering construction and equipping of the Savuka CLR plant and the TauTona B120 plant will commence as soon as the site excavation is completed which is anticipated to be in the first half of 2017. In the fourth quarter, the construction of the surface solution plant was completed. This plant is expected to allow for pumping the UHSB solution (UHSB product excluding cement) from surface to the B120 plant underground.

Mponeng extraction ratio improvement project product development is in progress. A range of designs have been tested and the characteristics modelled by rock engineering. Final results are pending before a suitable product can be identified.

 

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4C.

ORGANISATIONAL STRUCTURE

GROUP STRUCTURE

AngloGold Ashanti’s operations are divided into the following regions:

 

South Africa – operations in Vaal River, West Wits and surface operations;

 

Continental Africa – operations in Ghana, Guinea and Tanzania and joint venture operations in the DRC and Mali;

 

Australasia – operations in Australia; and

 

Americas – operations in Argentina and Brazil.

The above four regions also correspond to AngloGold Ashanti’s four business segments.

Day-to-day management of the group is entrusted to AngloGold Ashanti’s executive management team, chaired by the Chief Executive Officer. See “Item 6: Directors, Senior Management and Employees”.

Support is provided to the executive management team in managing AngloGold Ashanti’s corporate activities at both the central and local levels.

SUBSIDIARIES

AngloGold Ashanti Limited has investments in principal subsidiaries and joint venture interests, see “Item 19: Exhibits – Exhibit 19.8 Principal subsidiaries and operating entities” for details.

 

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4D.

PROPERTY, PLANTS AND EQUIPMENT

For more information about AngloGold Ashanti’s mines, including as to the company’s mining rights and licences refer “Item 4B: Business Overview—The regulatory environment enabling AngloGold Ashanti to mine”.

AngloGold Ashanti’s operating mines are all accessible by road.

SOUTH AFRICA - GEOLOGY

The Witwatersrand Basin comprises asix-kilometre thick sequence of inter-bedded argillaceous and arenaceous sediments that extend laterally for some 300 kilometres north-east/south-west and 100 kilometres north-west/south-east on the Kaapvaal Craton. The upper portion of the basin, which contains the orebodies, crops out at its northern extent near Johannesburg. Further west, south and east the basin is overlain by up to four kilometres of Archaean, Proterozoic and Mesozoic volcanic and sedimentary rocks. The Witwatersrand Basin is late Archaean in age and is considered to be in the order of 2.7 to 2.8 billion years old.

Gold occurs in laterally extensive quartz pebble conglomerate horizons or reefs, generally less than two metres thick, which are widely considered to represent laterally extensive braided fluvial deposits. Separate fan systems were developed at different entry points and these are preserved as distinct goldfields. The most fundamental control to the gold distribution in the Basin remains the sedimentary features, such as facies variations and channel directions. Gold generally occurs in native form often associated with pyrite and carbon, with quartz being the main gangue mineral.

Operations in the South Africa region are powered by electricity from Eskom Holdings Limited which supplies 95 percent of the electricity used in South Africa.

Vaal River operations

Description

The Vaal River operations consist of Kopanang, Moab Khotsong as well as the surface operations.

AngloGold Ashanti holds a number of mining rights in the Vaal River operations which have been successfully converted, executed and registered as new order mining rights at the Mineral and Petroleum Resources Titles Office (MPRTO).

Geology

In order of importance, the reefs mined at the Vaal River operations are the Vaal Reef (VR) and the Crystalkop Reef (CR):

 

 

The VR contains approximately 98 percent of the Ore Reserve tonnage with mining grades between 5 – 10 g/t and comprises a series of oligomictic conglomerates and quartzite packages developed on successive unconformities. Several distinct facies have been identified, each with its unique gold distribution and grade characteristic.

 

The CR is a thin, small pebble conglomerate with a carbon-rich basal contact, located approximately 270 metres above the VR. It has less than two percent of the estimated Ore Reserves with grades similar to the VR, but is more erratic. The most significant structural features are the north-east striking normal faults which dip to the north-west and south-east, resulting in zones of fault loss.

Vaal River – Summary of metallurgical operations

 

 

 
   West Gold
Plant
   Noligwa Gold
Plant
   Mispah Gold
Plant
   Kopanang Gold
Plant
 

 

 

Gold plants

        

Capacity (000 tonnes/month)

   180    260    140    420 

Uranium plants

        

Capacity (000 tonnes/month)

       260         

 

 

 

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Vaal River – Kopanang

Description

Kopanang is an underground operation located in the Free State province, roughly 170 kilometres southwest of Johannesburg and approximately 10 kilometres southeast of the town of Orkney on a lease area of 35km2. The operation, which started in 1984, is west of neighbour Great Noligwa (now part of Moab Khotsong) and bound to the south by the Jersey Fault. Gold is the primary output, with uranium oxide as aby-product from a single underground shaft system to a depth of 2,600 metres.

Kopanang almost exclusively exploits the Vaal Reef, although minor amounts of gold are also extracted from the secondary CR. Given the geologically complex orebody, scattered mining is used.

Vaal River – Moab Khotsong

Description

Moab Khotsong is an underground mine that started operations in 2003 and is AngloGold Ashanti’s newest gold mine in South Africa. It is situated near Orkney, Klerksdorp and Viljoenskroon, about 180 kilometres southwest of Johannesburg. Given the geological complexity of the Vaal Reef, scattered mining is employed. Great Noligwa mine was merged with Moab Khotsong in 2014 and operations are now collectively referred to as Moab Khotsong. Great Noligwa commenced production in 1968.

 

 

Surface Operations

Surface Operations in South Africa produce gold by processing surface material such as low grade stockpiles and there-treatment of Tailings Storage Facilities. Surface operations comprise Vaal River Surface, West Wits Surface and Mine Waste Solutions (MWS).

Low grade stockpiles

Description

The Vaal River and West Wits operations extract gold from various low grade stockpiles where there is spare metallurgical capacity. Uranium is produced as aby-product at Vaal River South Uranium Plant. In addition, backfill product is produced and used as support in the underground mining operations. The Hard Rock Surface Sources includes the rail transport infrastructure, the Vaal River and West Wits Laboratories and tailings management facilities.

Tailings Storage Facilities (TSF)

Description

The tailings dams consist of tailings material which originated from the processing of the underground ore from the Vaal River Operations (VR Surface), the West Wits Operations (WW Surface) and Buffels, Hartebeestfontein and Stilfontein Gold Mines (MWS).

The gold mines are deep-level gold mines, which predominantly extract the tabular, conglomeratic VR, Carbon Leader Reef (CLR) and Ventersdorp Contract Reef (VCR). The VR, CLR and VCR have been predominantly mined for gold in the past although the reef also contains uranium oxide. The material contained in the tailings dams is fine in nature. The footprints of the MWS tailings dams and Vaal River Surface Operations tailings dams cover an area of approximately 1,100ha.

MWS is a gold and uranium tailings recovery operation located in the western portion of the Witwatersrand Basin, some 160 kilometres from Johannesburg, approximately eight kilometres from the town of Klerksdorp near Stilfontein in the North West Province. It has been operational since 1964 and was previously owned by First Uranium Corp.

The MWS gold plants have the capacity to treat tailings of 2.2 million tonnes per month. The uranium plant has a design capacity of 100,000 tonnes per month. The uranium plant was commissioned in the fourth quarter of 2014.

 

 

West Wits operations

Description

The West Wits operations, Mponeng and TauTona, are situated southwest of Johannesburg, on the border between Gauteng and North West Province. From 1 January 2013 the Savuka mine was incorporated into the TauTona mine to access Savuka’s remaining Ore Reserve via TauTona’s infrastructure and Savuka and TauTona operate as a single mine.

 

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AngloGold Ashanti holds a number of mining rights in the West Wits area which have been successfully converted, executed and registered as new order mining rights at the Mineral and Petroleum Resources Titles Office (MPRTO).

Geology

Two reef horizons are exploited at the West Wits operations, the Ventersdrop Contact Reef (VCR) located at the top of the Central Rand Group and the CLR near the base. The separation between the two reefs increases from east to west from 400 to 900 metres, due to the VCR unconformity. TauTona exploits both reefs, whereas Mponeng only mines the VCR. Faults of greater than 70 metres are rare. The CLR consists of one or more conglomerate units and varies from several centimetres to more than two metres in thickness. Regionally, the VCR dips at approximately 21 degrees but may vary between 5 degrees and 50 degrees, accompanied by changes in thickness of the conglomerate units. Where the conglomerate has the attitude of the regional dip, it tends to be thick, well-developed, up to three metres in thickness, and is accompanied by higher gold accumulations. Where the attitude departs significantly from the regional dip, the reef is at times only a few centimetres in thickness.

West Wits – Mponeng

Description

Mponeng, in operation since 1986, is located between the towns of Carletonville and Fochville on the border between Gauteng and the North West Province, southwest of Johannesburg. The underground operation, the world’s deepest mine, currently extracts the VCR at depths between 3,160 metres and 3,740 metres BMD* through sequential-grid mining and is currently the deepest mine in the world with development at 3,841 metres BMD. Future mining is planned to deepen the shaft bottom to 4,227m BMD. In the future, the mining of the CLR from Mponeng will steadily increase. The Mponeng lease area is constrained to the north by the TauTona mine, to the east by Sibanye’s Driefontein mine and to the west by Harmony’s Kusasalethu mine. Mponeng comprises a twin-shaft system housing two surface shafts and twosub-shafts. Ore is treated and smelted at the mine’s gold plant. The plant has a monthly capacity of 170,000 tonnes.

West Wits – TauTona

Description

TauTona, in operation since 1961, lies on the West Wits Line, just south of Carletonville in Gauteng, about 70 kilometres southwest of Johannesburg. Underground mining takes place predominantly on the CLR horizon at depths ranging from 2,900m to 3,480m BMD*. The mine has a three shaft system, supported by secondary and tertiary shafts and employs mainly sequential grid mining method to mine the CLR. Savuka, which is adjacent to TauTona, was incorporated into TauTona in 2013 following a study in 2012 that concluded that the optimal, most efficient means of accessing Savuka’s remaining Ore Reserve would be through TauTona’s infrastructure. A link between the two mines reduces dependency on a single infrastructure system, including ore passes.

The TauTona and Mponeng reef material is processed through the Mponeng Gold Plant.

The Savuka Gold Plant has a monthly capacity of 280,000 tonnes, processing mainly material from the Mponeng low grade stockpile and tailings material from the Old North TSF.

* BMD is 1,828.8m Above Mean Sea Level (AMSL)

CONTINENTAL AFRICA

GHANA - Summary of metallurgical operations

 

   Obuasi          Iduapriem   
   Sulphide
Treatment Plant
  Tailings
Treatment Plant
  Alternate Ore
Treatment Plant
  

        Iduapriem  

Plant  

 

Capacity (000 tonnes/month)

  195   180   120   418   

Ghana – Iduapriem

Description

Iduapriem, wholly owned by AngloGold Ashanti since September 2007, comprises the Iduapriem and Teberebie properties on a 105km2 concession. The mine, which began operations in 1992, is situated in the western region of Ghana, some 85 kilometres north of the coastal city of Takoradi and eight kilometres southwest of Tarkwa.

 

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Iduapriem is anopen-pit mine and its processing facilities include aCarbon-in-pulp (CIP) plant.

Geology

The Iduapriem and Teberebie properties are located along the southern end of the Tarkwa basin. The mineralisation is contained in the Banket Series of quartz pebble conglomerates, breccia conglomerates and metasediments within the Tarkwaian System of Proterozoic age. The outcropping Banket Series of rocks in the mine area form prominent, arcuate ridges extending southwards from Tarkwa, westwards through Iduapriem and northwards towards Teberebie. The gold is hosted within the conglomerates.

Ghana – Obuasi

Description

Obuasi, wholly owned by AngloGold Ashanti since 2004 and currently in a care and maintenance phase, is located in the Ashanti Region of Ghana, some 320 kilometres north-west of the capital Accra and approximately 60 kilometres south of Kumasi. Mining operations are primarily underground, to a depth of 1.5 kilometres. Obuasi originally opened in 1897.

Geology

The gold deposits at Obuasi are part of a prominent gold belt of Proterozoic (Birimian) volcano-sedimentary and igneous formations which extend for a distance of approximately 300 kilometres in a north-east/south-west trend insouth-western Ghana. Obuasi mineralisation is shear-zone related and there are three main structural trends hosting gold mineralisation: the Obuasi trend, the Gyabunsu trend and the Binsere trend.

Two main ore types are mined:

 

quartz veins which consist mainly of quartz with free gold in association with lesser amounts of various metal sulphides such as iron, zinc, lead and copper. The gold particles are generally coarse-grained and occasionally visible to the naked eye. This ore type is generallynon-refractory; and

 

sulphide ore which is characterised by the inclusion of gold in the crystal structure of a sulphide material. The gold in these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer grained arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally refractory.

Power is supplied to the mines by the Volta River Authority and the transmission is done by the GridCo Company.

GUINEA

Description

Siguiri, a multipleopen-pit oxide gold mine which opened in 1997, is AngloGold Ashanti’s sole operation in the Republic of Guinea. It is located in the district of Siguiri. The mine is located approximately 520 kilometres north-northeast of Conakry, 25 kilometres northwest of the town of Siguiri and 190 kilometres southeast of the Malian capital Bamako, near the Mali boarder. Conventional mining activities are performed by contractors in multiple open pits using conventional techniques. On surface, Siguiri’s gold processing plant treats about 998,000 tonnes per month. Power to the mine is self-generated.

AngloGold Ashanti holds an 85 percent interest in Siguiri and the balance of 15 percent is held by the government of Guinea.

Geology

This concession is dominated by Proterozoic Birimian rocks which consist of turbidite facies sedimentary sequences. The two main types of gold deposits which occur in the Siguiri basin and are mined are:

 

laterite mineralisation (CAP) which occurs as surficial aprons of colluvium or aspalaeo-channels of alluvial lateritic gravel adjacent to, and immediately abovein-situ deposits; and

 

in-situ quartz-vein related mineralisation hosted in meta-sediments with the better mineralisation associated with vein stockworks that occurs preferentially in the coarser, brittle siltstones and sandstones.

The mineralised rocks have been deeply weathered to below 100 metres in places to form saprolite mineralisation (oxide). With the percentage of available oxide ore decreasing, a feasibility study to consider the exploitation of the fresh rock material was completed in December 2015. The project will upgrade the current plant and enable processing of a combination of oxides and fresh rock material. The plant throughput will remain at 12Mtpa with a flexible design allowing up to 6Mtpa fresh rock to be processed. Targeted fresh rock pits include Kami, Bidini, Tubani, Sintroko, Seguelen and Sokuno. The feasibility study has been approved by AngloGold Ashanti, AGA has concluded successful negotiations with the Government of Guinea of the Convention de Base and access to the required areas has been received so the project will proceed.

 

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MALI

AngloGold Ashanti has interests in three operations in Mali, namely, Sadiola, Yatela and Morila. It manages two of these operations, Sadiola and Yatela.

Mali – Morila

Description

AngloGold Ashanti has an effective 40 percent stake in Morila, as does Randgold Resources Limited (which manages the mine). The state of Mali owns the remaining 20 percent.

The Morila mine has operated since 2001 and is situated 280 kilometres southeast of Bamako, the capital of Mali. When mining concluded in 2009 with the depletion of the orebody, operations at Morila transitioned to stockpile and tailings retreatment. The plant, which incorporates a conventional CIL process with an upfront gravity section to extract the free gold, has annual throughput capacity of 3.7 million tonnes. Power is supplied by a subcontractor.

Geology

The Morila deposit is hosted in a flat lying fold structure which rises sharply to surface in the south and west. The deposit occurs within a sequence Birimian metal-arkoses of amphibolite metamorphic grade. Mineralisation is characterised by silica-feldspar alteration and sulphide mineralisation consists of arsenopyrite, pyrrhotite, pyrite and chalcopyrite.

Mali – Sadiola

Description

The Sadiola mine is situated in western Mali, 77 kilometres to the south of the regional capital of Kayes and about 440 kilometres north-west of the capital city of Bamako. The mine is a joint venture between AngloGold Ashanti (41 percent) and IAMGOLD (41 percent) and the government of Mali (18 percent). The Sadiola gold deposit has been mined by the Société d’Exploitation des Mines d’Or de Sadiola S.A. (SEMOS) since 1996. Mining reduced considerably to adapt to the 2014 gold price decrease but continued predominantly in various satellite pits.On-site surface infrastructure includes a 4.9 million tonnes per annum CIP gold plant where the ore is eluted and smelted. Power to the Sadiola mine is self-generated.

From 1996 until 2010, oxide and transitional ore from the Sadiola Hill pit was the primary ore source for the mine while being increasingly supplemented from the outlying satellite pits during the latter years. From 2011 when the Sadiola Main pit was mined out, the satellite pits became the dominant source of oxide and transitional ore. A project is currently under consideration to mine the underlying sulphide ore and upgrade the processing plant to treat the hard sulphide ore. The Company is evaluating the possibility of supplying power to the project through the grid and is negotiating fiscal provisions with the government of Mali.

Geology

The Sadiola deposit occurs within an inlier of greenschist facies metamorphosed Birimian rocks known as the Kenieba Window. The specific rocks which host the mineralisation are marbles and greywackes which have been intensely weathered to a maximum depth of 200 metres. As a result of an east-west regional compression event, deformation occurs along a north-south striking marble-greywacke contact, increasing the porosity of this zone. North-east striking structures which intersect the north-south contact have introduced mineralisation, mainly with the marble where the porosity was greatest. The Sadiola Hill deposit generally consists of two zones, an upper oxidised cap and an underlying sulphide zone.

Mali – Yatela

Description

Yatela, operational since 2001, is 80 percent owned by the Sadiola Exploration Company Limited, a joint venture between AngloGold Ashanti and IAMGOLD, giving each a 40 percent stake in Yatela. The balance of 20 percent is owned by the state of Mali.

The Yatela mine, which was a heap leach operation, is situated in western Mali, some 25 kilometres north of Sadiola and approximately 50 kilometres south-southwest of the regional capital Kayes. Ore extraction ceased in September 2013 and processing of the stockpiles and heap leach pads ended in the fourth quarter of 2016. The main activity at Yatela is the implementation of the closure plan in order to relinquish the property. Power to the Yatela operation is self-generated.

 

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Geology

Yatela mineralisation occurs as a keel-shaped body in Birimian metacarbonates. The ‘keel’ is centered on a fault which was the feeder for the original mesothermal mineralisation, with an associated weakly mineralised diorite intrusion. Mineralisation occurs as a layer along the sides and in the bottom of the ‘keel’. The ore dips almost vertically on the west limb and more gently towards the west on the east limb, with tight closure to the south.

TANZANIA

Tanzania – Geita

Description

The Geita gold mine is located in the Lake Victoria goldfields of the Mwanza region of Tanzania, about 120 kilometres west of Mwanza and four kilometres away from the town of Geita. It has been in operation since 1996.

The Geita gold mine is a multiple open pit operation with underground potential and is currently serviced by a 5.1 million tonnes per annum CIL processing plant. Power to the mine is self-generated. In 2015, underground mining commenced at Geita with the development of declines and the opening up of stopes below the Star and Comet pit. The mine is currently evaluating additional underground options to increase production and extend the mine’s life.

Geology

Geita is a multi- open pit operation with the dominant ore sources being from the Nyankanga and Geita Hill pits. Historically, other pits such as Star and Comet, Matandani and Kukuluma have also contributed to the ore feed. The terrain is Archaean in age and generally characterised by Greenschist metamorphism, although amphibolitic metamorphism occurs in places. Ore zones are usually associated with Banded Iron Formation (BIF) or other iron rich rocks and typically when they are in contact with intrusive rocks such as diorites. These contacts have been deformed and act as fluid pathways for the mineralising fluids. Gold mineralisation is associated with alteration that includes sulphides such as pyrite and arsenopyrite, whilst other minerals such as hematite, magnetite, quartz, calcite, dolomite, biotite and chlorite also occur.

DEMOCRATIC REPUBLIC OF THE CONGO

Kibali

Description

The Kibali Gold Mine is a Joint venture between AngloGold Ashanti (45 percent), Randgold Resources Limited (45 percent) with Société Miniere de Kilo-Moto SA UNISARL (SOKIMO), a state-owned gold company owning the balance. Randgold Resources is the operator.

Kibali is located in the north-eastern part of the DRC near the international borders with Uganda and Sudan. The mine is located adjacent to the village of Doko, which is located in the west of the project area. Kibali is approximately 210 kilometres by road from Arua, on the Ugandan border and immediately north of the district capital of Watsa. The operations area falls within the administrative district of Haut Uélé in Orientale Province. Power to the mine is self-generated. Gold production began in the fourth quarter of 2013 from open pit operations and underground mining commenced in 2014. It has a processing operation capable of producing an average of 600koz of gold per annum by treating 7.2Mtpa throughput. The processing plant has a capability of processing both oxide and sulphide material.

The shaft reached the completed depth of 751.2m in the first quarter of 2015 and its equipping was completed in the first half of 2016. The first ore from the shaft is expected in the second half of 2017.

Geology

The Kibali Gold Mine is located within the Moto Greenstone Belt, which consists of Archean Kibalian volcano sedimentary rocks and ironstone-chert horizons that have been metamorphosed to greenschist facies.

The combined Karagba, Chauffeur and Durba (KCD) deposit is host to the majority of the currently defined Mineral Resource and Ore Reserve, as well as the current open pit and underground mining operations. KCD is hosted within a mineralised corridor that also hosts the Sessenge, Gorumbwa and Pakaka deposits and a number of exploration prospects.

 

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The known deposits of the Kibali project are hosted along a reactivated thrust plane that creates plunging lodes of mineralisation as exemplified by the KCD deposit. The majority of gold mineralisation identified to date is disseminated style, hosted within a sequence of coarse volcaniclastic and sedimentary rocks. The mineralisation is generally stratigraphically bound and associated with carbonate-silica-albite alteration with minor sulphide.

AUSTRALASIA

AUSTRALIA

Australia – Sunrise Dam

Description

Sunrise Dam, which is wholly-owned, is located 220 kilometres northeast of Kalgoorlie and 55 kilometres south of Laverton in Western Australia. Underground mining, which is conducted by a contract mining company, is the primary source of ore, with supplementary mill feed provided by stockpiles. Ore is treated via conventional gravity andcarbon-in-leach (CIL) processing plant, with a nameplate capacity of 2.5Mt per annum, which is owner-managed.

Open pit production began in 1997 and has now been completed at a final depth of 500m below surface and mining of the Crown Pillar at the base of the 490m deep pit was completed in early 2014. Underground mining commenced in 2003 with a number of different mining methods being applied, depending on the style of mineralisation and grade of the geological domain.

Power at Sunrise Dam is self-generated and the mine uses natural gas supplied by APA Operations (Pty) Limited.

Geology

Gold ore at Sunrise Dam is structurally and lithologically controlled within gently dipping high strain shear zones and steeply dipping brittle-ductile low strain shear zones. Host rocks include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.

Australia - Tropicana

Description

Tropicana, a joint venture between AngloGold Ashanti (70 percent and manager) and Independence Group NL (30 percent), is located 200 kilometres east of Sunrise Dam and 330 kilometres east-northeast of Kalgoorlie. First gold was poured ahead of schedule and on budget in September 2013, following development approval in November 2010. The open pit operation features a large scale, modern processing plant which uses conventionalcarbon-in-leach technology and includes high-pressure grinding rolls for energy-efficient comminution. Mining is carried out by a contract mining company and the plant, with a nameplate capacity of 5.8Mt per annum, is owner-managed.

The mine is afly-infly-out operation, with a mine site village and aviation services operated from Perth and Kalgoorlie. A 220 kilometres private road and the public road network provide access for the delivery of supplies to the operation.

The Tropicana JV includes approximately 1,838km2 of tenure in the prospective Tropicana belt, with active exploration programmes seeking both satellite extensions to the Tropicana Gold Mine and discoveries with standalone potential. A study is currently underway to evaluate possible strip mining of the depth extension of the Tropicana mineralized system, which is expected to be completed in mid 2017.

Power is supplied to the mine by on site gas and diesel power stations, natural gas is supplied by APA Operations (Pty) Limited.

Geology

Gold mineralisation at Tropicana occurs in high metamorphic grade gneissic rocks, which dip gently to the south east. Mineralisation is structurally controlled and occurs within a preferred host unit within the gneissic package. Post mineralisation faulting has separated the once continuous ore zone, with the open pits developed on each of the fault bounded blocks.

 

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THE AMERICAS

ARGENTINA

Argentina – Cerro Vanguardia

Description

AngloGold Ashanti has a 92.5 percent interest in Cerro Vanguardia with Fomicruz owning the remaining 7.5 percent. Located to the northwest of Puerto San Julian in the province of Santa Cruz, Cerro Vanguardia consists of multiple small open pits and underground mines. Shallow underground mining began in 2010 to access high-grade material and accounts for about 30 percent of the mine’s production. The orebodies comprise a series of hydrothermal vein deposits containing gold and large quantities of silver, which is mined as aby-product. Ore is processed at either the metallurgical plant which has a capacity of 3,450 dry tonnes per day and includes a cyanide recovery facility or the heap leach operation which started in 2012 to process the low grade material. Power for the mine is self-generated but operated by an external contractor. The mine has been operated by AngloGold Ashanti since 1998.

Geology

The oldest rocks in this part of Patagonia are metamorphics of the Precambrian-Cambrian age. These are overlain by Permian and Triassic continental clastic rocks which have been faulted into a series of horsts and grabens and are associated with both limited basaltic sills and dykes and with calc-alkaline granite and granodiorite intrusions. Thick andesite flows of Lower Jurassic age occur above these sedimentary units. A large volume of rhyolitic ignimbrites was emplaced during the Middle and Upper Jurassic age over an area of approximately 100,000 square kilometres. These volcanic rocks include the Chon Aike formation ignimbrite units that host the gold bearing veins at Cerro Vanguardia. Post-mineral units include Cretaceous and Tertiary rocks of both marine and continental origin, the Quaternary La Avenida formation, the Patagonia gravel and the overlying La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.

Gold and silver mineralisation at Cerro Vanguardia occurs within a vertical range of about 150 metres to 200 metres in a series of narrow, banded quartz veins that occupy structures within the Chon Aike ignimbrites. These veins form a typical structural pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in response to this shearing. One set of veins strikes about N40W and generally dips 65 to 90 degrees to the east; while the other set strikes about N75W and the veins dip 60 degrees to 80 degrees to the south.

The veins are typical of epithermal,low-temperature, adularia-sericite character and consist primarily of quartz in several forms: as massive quartz, banded chalcedonic quartz, and quartz-cemented breccias. Dark bands in the quartz are due to finely disseminated pyrite, now oxidised to limonite. The veins show sharp contacts with the surrounding ignimbrite which hosts narrow stockwork zones that are weakly mineralised and appear to have been cut by a sequence of north-east-trending faults that have southerly movement with no appreciable lateral displacement.

BRAZIL

Brazil – AngloGold Ashanti Córrego do Sítío Mineração (AGA Mineração)

Description

AngloGold Ashanti Córrego do Sítío Mineração (AGA Mineração) comprises two operational units, namely the Cuiabá and the Córrego do Sítío complexes.

The Cuiabá complex includes the Cuiabá and Lamego mines and the Cuiabá and Queiroz plants. The Cuiabá and Lamego mines are located near Sabará, southeast and east respectively of the city of Belo Horizonte, the capital of Minas Gerais State, in the southeast of Brazil. The Cuiabá mine is a mix ofcut-and-fill and long hole stoping accessed by ramp and shaft. Lamego is a new mine developed to mine an underground sulphide ore. The first stage of the processing of the ore from Cuiabá and Lamego mines is in the gold plant at the Cuiabá complex, where concentrate is produced. The material is then transported 15 kilometres by aerial ropeway to the Queiroz plant where milling, flotation, roasting, leaching, precipitation and refining occur. Total capacity of the complete circuit is 1.7 million tonnes per year and recoveries of 93 percent are achieved. Power for the mine is both self-generated and supplied by Cemig a state owned company. The Cuiabá mine became operational in 1988 and the Lamego mine in 2009. Some of the older mines which are now closed have been operating since 1834.

The Córrego do Sítío (CdS) is located in the Municipality of Santa Bárbara, 60 kilometres east of the city of Belo Horizonte, the capital of Minas Gerais state. The southern portion of this mining complex is referred to as CdS I while the northern portion (formerly known as São Bento) has been renamed CdS II. CdS comprises one surface (oxide) and twosub-level stoping underground (sulphide) mines, as well as a heap leach pad and sulphide plant, the latter originally acquired from Eldorado late in 2008 was refurbished and brought into operation in January 2012. There are two metallurgical plants in CdS: the heap-leach plant for the oxide ore and the sulphide plant. The sulphide process consists of crushing, grinding and gravity concentration, flotation, thickening, acidulation, pressure oxidation (POX autoclave), CCD (counter current decantation), CIL extraction, elution, neutralisation, electro winning and tailings disposal. The plant and POX circuit have a capacity as of 600ktpy. The heap-leaching process consists of crushing, agglomeration, stacking, leaching, adsorption, elution and electro winning. Power is supplied to CdS by Cemig a state owned company.

 

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Geology

The area in which AGA Mineração is located is known as the Iron Quadrangle and is host to historic and current gold mining operations, as well as a number ofopen-pit limestone and iron ore operations. The geology of the Iron Quadrangle is composed of Proterozoic and Archaeanvolcano-sedimentary sequences andPre-Cambrian granitic complexes. The host to the gold mineralisation is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas SuperGroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at Sabara Municipality, has gold mineralisation associated with sulphides and quartz veins in Banded Ironstone Formation (BIF) and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for gold mineralisation with a common association between large-scale shear zones and their associated structures. Where BIF is mineralised the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply plunging shear zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears and other structures.

The controlling mineralisation structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile environment. The host rocks at Brasil Mineração are BIF, Lapa Seca and mafic volcanics (principally basaltic). Mineralisation is due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and carbonaceous graphitic schists. Sulphide mineralisation consists of pyrrhotite and pyrite with subordinate pyrite and chalcopyrite; the latter tends to occur as a late-stage fracture fill and is not associated with gold mineralisation. Wallrock alteration is typically carbonate, potassic and silicic.

Brazil – Serra Grande

Description

Serra Grande is located in central Brazil, in the state of Goiás, about five kilometers from the city of Crixás. Serra Grande comprises three mechanised underground mines: Mina III (which includes orebody IV), Mina Nova (which includes the Pequizão orebody) and Palmeiras – and an open pit in the outcrop of Mina III orebodies. A gold bearing quartz vein was identified just beneath Pequizão Orebody and a new decline is being developed from Mina III (orebody IV) to access and expose this new orebody named Ingá, which contains high grade ore. One dedicated metallurgical plant treats ore from these different sources. The annual capacity of the processing circuit, which has grinding, leaching, filtration, precipitation and smelting facilities, is 1.3 million tonnes. The power for the mine is supplied and purchased in the open market. The mine became operational in 1989 and has been operated by AngloGold Ashanti since 1999.

Geology

The gold ore deposits are located in the Rio Vermelho and Ribeirão das Antas Formations of the Archaean Pilar de Goia’s Group which account together for a large proportion of the Crixás Greenstone Belt in central Brazil.

The stratigraphy of the belt is dominated by basics and ultrabasics in the lower sequences with volcano sedimentary units forming the upper successions.

The gold deposits are hosted in a sequence of schists, meta volcanics and dolomites occurring in a typical greenstone belt structural setting. Gold mineralisation is associated with massive sulphides and vein quartz material associated with carbonaceous and sericitic schists and dolomites. The oreshoots plunge to the north-west with dipping between six and 35 degrees. The stratigraphy is overturned and thrusted towards the east, being recognized different shear thrust structures that are stacked and controls the mineralisation, behaving as frontal and lateral ramps and horses.

The greenstone belt lithologies are surrounded by Archaean tonalitic gneiss and granodiorites of TTG suite. The metamorphic sediments are primarily composed of quartz, chlorite, sericite, carbonaceous material and garnetiferous schists. The carbonates have been metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding wallrock, usually associated with quartz veins. The basalts are relatively unaltered but do show pronounced stretching with elongation of pillow structures being evident.

The Crixás greenstone belt comprises a series of Archaean to Palaeoproterozoic metavulcanics, metasediments and basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (D1) was accompanied by significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime. D1 thrusting was developed with irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main Crixás orebodies are adjacent to a majornorth-northwest structural corridor, and up the main fault ramp/corner, to become dispersed to the east and north in zones of foreland thrust flats. Fluid alteration also diminished to the west away from the main fault corner. A series of concealed east-west tonorthwest-southeast basement block faults may have provided secondary fluid migration, and development of earlyanti-formal warps in the thrust sheets; these structures probably define thequasi-regular spacing of significant mineralisation within the belt. The D1 thrust stack was gently folded bynon-cylindrical folds. Gold mineralising fluids probably migrated during this event, with

 

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similarsouth-south-west tonorth-north-east migration, and focusing on bedding slip during folding. Gold mineralisation became minor and dispersed to the north and east along the formal thrust flat zone. Concentrations of gold along the case of quartz vein may be due to the damming of fluids migrating upward along layering.

Brazil – Summary of metallurgical operations

 

    Córrego do Sítío   Córrego do Sítío   AngloGold Ashanti Mineração   Serra Grande   
    Oxide   Sulphide   Cuiabá   Raposos      

Capacity

(000 tonnes/month)

   45      55      150      18      110   

ORE RESERVES

The combined Proven and Probable Ore Reserve of the group amounted to 50.0 million ounces as at 31 December 2016.

Ore Reserve estimates are reported in accordance with the requirements of the SEC’s Industry Guide 7. Accordingly, as of the date of reporting, all Ore Reserves are planned to be mined out under thelife-of-mine plans within the period of AngloGold Ashanti’s existing rights to mine, or within the renewal periods of AngloGold Ashanti’s rights to mine. In addition, as of the date of reporting, all Ore Reserves are covered by required mining permits or there is a high probability that these approvals will be secured.

AngloGold Ashanti has standard procedures for the estimation of Ore Reserve. These standard procedures are performed by experienced technical personnel at the mining operations and reviewed by regional and corporate Competent Persons.

In the case of its underground mines, the procedure is as follows: Firstly, gold content and tonnage are estimated forin-situ mineralised material at a mining operation. This mineralized material is not necessarily economically viable over the full extent of the operation. Exclusions on the grounds of safety (for example, stability pillars and shaft pillars) are then also defined. Grade-tonnage curves specific for each of the deposits, in conjunction with parameters such as the cost structure, yield, mine call factor and gold price estimates are used to determine an optimal mining mix. This process facilitates the determination of the average grade to be mined by each operation. This grade is then applied to the grade-tonnage curves, which in turn facilitates the determination of thecut-off grade and Ore Reserve tonnage for the operation. A full mine design is carried out on the blocks of mineralised material, excluding any large mining areas that do not meet thecut-off grade criterion. This mining plan is reviewed to ensure that it satisfies the economic criteria and practical limitations of access and timing. If the review process is positive then the mineralised material (with dilution and discounts) included in the mining plan is declared and published as the Ore Reserve for that operation.

In the case ofopen-pit mines the procedure is as follows: revenue and costs are calculated for each mining block within a three-dimensional model of the ore body using estimated values for gold price, operating costs and metallurgical recoveries. An optimisation process is then applied to determine the combination of blocks within the model that make a positive contribution under these estimations. Block selection is within a shell whose limits are defined by the planned slope angles of the pit. Within this process, acut-off grade is applied which determines the ore blocks to be treated and included in the Ore Reserve. These blocks are scheduled with consideration being given to practical mining constraints and limitations. Scheduled ore blocks that are classified as Proven or Probable constitute the Ore Reserve.

The gold price used for determining the 2016 and 2015 Ore Reserve are outlined in the following table.

 

    2016
(3 year
average)
   2016
(Ore
Reserve)
   2015
(3 year
average)
   

 

Units  

 

Ore Reserve Gold Price

   1,225    1,100    1,278    US$ per ounce   

The Ore Reserve determined from the planning process was then tested for economic viability at the three-year historical average gold price shown in the above table for determining the SEC compliant Ore Reserve. The test indicates the vast majority of the SAMREC/JORC Ore Reserves are economically viable and meet the requirements of the SEC. Therefore the SEC and SAMREC/JORC Ore Reserve are all but identical except for TauTona, Kopanang and AGA Mineração where the three year average exchange rate caused small reductions. The resultant SEC compliant Proven and Probable Ore Reserve is shown in the following pages.

In Australia and South Africa, AngloGold Ashanti is legally required to publicly report Ore Reserve and Mineral Resource according to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code,

 

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2012 edition) and the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves (The SAMREC Code, 2016 edition). The SEC’s Industry Guide 7 does not recognise Mineral Resources. Accordingly, AngloGold Ashanti does not report estimates of Mineral Resource in this annual report on Form20-F.

The AngloGold Ashanti Ore Reserve decreased from 51.7Moz in December 2015 to 50.0Moz in December 2016. This gross annual decrease of 1.7Moz includes depletion of 3.9Moz. The balance of 2.2Moz additions in Ore Reserve, results from changes in economic assumptions between 2015 and 2016 of 0.2Moz, whilst exploration and modelling changes resulted in further additions of 2.3Moz. Other factors resulted in a 0.3Moz decrease. The Ore Reserve has been estimated using a gold price of US$1,100/oz (2015: US$1,100/oz).

The principal changes in AngloGold Ashanti’s Ore Reserves as at 31 December 2016, compared with those published as at 31 December 2015, are as follows:

 

ORE RESERVE     Moz 
Ore Reserve as at 31 December 2015  51.7 

 

 

Depletions

     -3.9 
   Sub Total   47.8 

Additions

    

Tropicana

  Introduction of the Long Island project and the HA04 pit.   1.1 

AGA Mineração

  Ore Reserve variation due to change in costs and revenue factor as well as minor mining method and revised estimation techniques changes.   0.6 

Siguiri

  Mainly due to model changes.   0.5 

Sunrise Dam

  Increase due to revised drill spacing requirements. Vogue ore body had large increase due to the drill spacing change and additional diamond drilling.   0.4 

Other

  Additions less than 0.3Moz.   0.8 
   Sub Total   51.2 

Reductions

    

Kibali

  Decrease is the result of a new geological model.   -0.3 

Other

  Reductions less than 0.3Moz.   -0.9 

Ore Reserve as at 31 December 2016

   50.0 

AngloGold Ashanti strives to actively create value by growing its major asset – the Ore Reserve. This drive is based on a well-defined brownfields and greenfields exploration programme, innovation in both geological modeling and mine planning and optimisation of its asset portfolio.

The Ore Reserve estimates in this document include the Ore Reserve below the current infrastructure of underground mines. These include mines in South Africa, Ghana and Brazil.

By-products

Severalby-products are recovered as a result of the exploitation of gold Ore Reserve. Theby-products include 123.48 million pounds of uranium oxide from the South African operations, 0.46 million tons of sulphur from Brazil and 18.2 million ounces of silver from Argentina.

External reviews of Mineral Resource and Ore Reserve Statement

During the course of 2016, the following operations were subject to an external review in line with the policy that each operation/ project will be reviewed by an independent third party on average once every three years:

 

 

Mineral Resource and Ore Reserve at South African Surface Operations

 

Mineral Resource and Ore Reserve at AGA Mineração – Córrego do Sítio

 

Mineral Resource and Ore Reserve at Sadiola

The external reviews were conducted by AMEC, Optiro and Snowden respectively. The company has been informed that the external reviews identified no material shortcomings in the process of evaluation of the grade models and estimation of the Ore Reserve.

 

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Competent Persons

The information in this report relating to the Ore Reserve is based on information compiled by or under the supervision of the Competent Persons as defined in the JORC or SAMREC Codes. All Competent Persons are employed by AngloGold Ashanti, unless stated otherwise, and have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking. The Competent Persons consent to the inclusion of Ore Reserve information in this report, in the form and context in which it appears. Details of the Competent Persons per operation are given in the Mineral Resource and Ore Reserve Report 2016, which is available on the corporate website. The legal tenure of each operation and project has been verified to the satisfaction of the accountable Competent Person and all Ore Reserves have been confirmed to be covered by the required mining permits or there is a high probability that these permits will be issued.

Over more than a decade, the company has developed and implemented a rigorous system of internal and external reviews aimed at providing assurance in respect of Ore Reserve estimates were completed by suitably qualified Competent Persons from within AngloGold Ashanti. A documented chain of responsibility exists from the Competent Persons at the operations to the company’s Mineral Resource and Ore Reserve Steering Committee. Accordingly, the Chairman of the Mineral Resource and Ore Reserve Steering Committee, VA Chamberlain, MSc (Mining Engineering), BSc (Hons) (Geology), MGSSA, FAusIMM, assumes responsibility for the Mineral Resource and Ore Reserve processes for AngloGold Ashanti and is satisfied that the Competent Persons have fulfilled their responsibilities.

A detailed breakdown of Mineral Resource and Ore Reserve and backup detail is provided on the AngloGold Ashanti website (www.anglogoldashanti.com) andwww.aga-reports.com.

 

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Ore Reserve: Imperial  At 31 December 2016     
   Proven Ore Reserve (1) (2)   Probable Ore Reserve (1) (2)   Metallurgical   Cut-off 
   Tons(5)   Grade   Gold
Content
   Tons(5)   Grade   Gold
Content
   Recovery
Factor
   Grade (10) 
   (million)   (oz/ton)   (Moz)   (million)   (oz/ton)   (Moz)   percent   (oz/ton) 

 

 

South Africa

                

Vaal River(6)

                

Kopanang

   1.79    0.156    0.28    1.10    0.163    0.18    95.6-95.7 (4)    0.278 

Moab Khotsong (2)

   2.93    0.249    0.73    15.50    0.276    4.27    95.6-96.4 (4)    0.119-0.170(4) 

West Wits

                

Mponeng(2)

   1.34    0.278    0.37    41.47    0.292    12.11    97.4-98.0(4)    0.122-0.208(4) 

TauTona

   0.55    0.323    0.18    2.28    0.243    0.55    96.7-97.0(4)    0.219-0.239(4) 

 

 

Surface

                

Surface sources(6) (9)

   146.21    0.006    0.92    698.63    0.008    5.48    42.0-92.0(4)    0.007-0.011(4) 

 

 

Continental Africa

                

DemocraticRepublicof the Congo

                

Kibali (45 percent) (3) (11)

   2.13    0.055    0.12    32.98    0.122    4.01    84.5-88.9(4)    0.044-0.070(4) 

 

 

Ghana

                

Iduapriem

   3.21    0.022    0.07    46.69    0.038    1.77    92.0-96.0(4)    0.015-0.026(4) 

Obuasi(2)

   0.00    0.000    0.00    23.49    0.234    5.49    89.0    0.128-0.152(4) 

 

 

Guinea

                

Siguiri (85 percent)(3)

   28.11    0.019    0.53    76.07    0.025    1.92    88.0-93.0(4)    0.015-0.022(4) 

 

 

Mali

                

Morila (40 percent)(3) (11)

   0.00    0.000    0.00    6.81    0.016    0.11    57.0    0.014 

Sadiola (41 percent)(3)

   0.01    0.069    0.00    34.85    0.052    1.80    75.0-94.0(4)    0.013-0.023(4) 

 

 

Tanzania

                

Geita

   0.00    0.000    0.00    18.09    0.109    1.97    89.3-92.7(4)    0.028-0.131(4) 

 

 

Australasia

                

Australia

                

Sunrise Dam

   12.87    0.029    0.37    11.64    0.083    0.97    80.9-85.0(4)    0.018-0.036(4) 

Tropicana (70 percent)(3)

   12.10    0.043    0.52    34.27    0.062    2.14    90.0    0.020 

 

 

Americas

                

Argentina

                

Cerro Vanguardia (92.5 percent)(3) (7)

   6.58    0.043    0.28    4.70    0.141    0.66    61.8-95.9(4)    0.013-0.146(4) 

 

 

Brazil

                

AGA Mineraçáo(2) (8)

   3.88    0.140    0.55    7.68    0.152    1.16    70.0-93.3(4)    0.017-0.105(4) 

Serra Grande(2)

   2.66    0.073    0.19    3.53    0.080    0.28    88.5-94.7(4)    0.071 

 

 

Total

   224.36    0.023    5.12    1,059.73    0.042    44.87     

 

 
(1)

Ore Reserve includes marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.

(2)

Proven and/or Probable Ore Reserve includes Ore Reserve below infrastructure. See table that follows.

(3)

Ore Reserve attributable to AngloGold Ashanti’s percentage interest shown.

(4)

Recovery factor andcut-off grade vary according to ore type.

(5)

Tons refers to a short ton, which is equivalent to 2000 pounds avoirdupois.

(6)

The Vaal Reef Ore Reserve includes 123.48 million pounds of Uranium oxideby-products; this cannot be accounted for by individual mine as Kopanang, Moab Khotsong and Surface sources in Vaal River feed to a combination of plants.

(7)

The Ore Reserve contains 18.24 million ounces of silver to be recovered as aby-product.

(8)

The Ore Reserve contains 0.46 million tons of sulphur to be recovered as aby-product.

(9) 

Includes Mine Waste Solutions (MWS).

(10) 

In-situcut-off grade.

(11) 

Ore Reserve is estimated by Competent Persons employed by Randgold Resources Limited.

Rounding may result in computational differences.

 

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The 2016 Proven and Probable Ore Reserve includes Ore Reserve below infrastructure in the case of the following underground mines currently in production:

 

Mine  Tons (millions)  Grade (ounces/ton)  

Gold Content

(million ounces)

Moab Khotsong

  11.89  0.28  3.32

Mponeng

  30.35  0.28  8.56

Obuasi

  1.92  0.67  1.29

AGA Mineração

  1.97  0.18  0.35

Serra Grande

  1.18  0.09  0.10

Total

  47.31  0.29  13.63

The Ore Reserve has been determined based on completed economic studies.

 

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Ore Reserve: Imperial  At 31 December 2015     
   Proven Ore Reserve (1) (2)   Probable Ore Reserve (1) (2)   Metallurgical   Cut-off 
   Tons(5)   Grade   Gold
Content
   Tons(5)   Grade   Gold
Content
   Recovery
Factor
   Grade (11) 
   (million)   (oz/ton)   (Moz)   (million)   (oz/ton)   (Moz)   percent   (oz/ton) 

 

 

South Africa

                

Vaal River(6)

                

Kopanang

   1.90    0.187    0.35    2.01    0.200    0.40    95.3-95.5 (4)    0.278 

Moab Khotsong (2) (9)

   2.82    0.238    0.67    15.79    0.291    4.59    96.0-96.3 (4)    0.120-0.177(4) 

West Wits

                

Mponeng(2)

   1.89    0.233    0.44    42.20    0.291    12.30    97.6-98.2(4)    0.122-0.208(4) 

TauTona

   0.74    0.287    0.21    3.82    0.220    0.84    97.0-97.3(4)    0.228-0.232(4) 

 

 

Surface

                

Surface sources(6) (10)

   129.5    0.006    0.79    705.90    0.008    5.54    40.0-92.0 (4)    0.006-0.015(4) 

 

 

Continental Africa

                

DemocraticRepublicof the Congo

                

Kibali (45 percent)(2) (3) (12)

   2.01    0.053    0.11    37.61    0.124    4.66    84.5-88.9(4)    0.044-0.073(4) 

 

 

Ghana

                

Iduapriem

   3.68    0.023    0.09    54.28    0.040    2.18    94.5    0.024-0.027(4) 

Obuasi(2)

   0.00    0.000    0.00    21.55    0.267    5.74    86.9    0.128-0.146(4) 

 

 

Guinea

                

Siguiri (85 percent)(3)

   29.99    0.018    0.53    66.43    0.023    1.56    88.0-93.0(4)    0.012-0.021(4) 

 

 

Mali

                

Morila (40 percent)(3) (12)

   0.00    0.000    0.00    6.82    0.016    0.11    57.0-91.0(4)    0.014-0.027(4) 

Sadiola (41 percent)(3)

   0.00    0.000    0.00    27.90    0.060    1.69    75.0-96.0(4)    0.025-0.032(4) 

 

 

Tanzania

                

Geita

   0.00    0.000    0.00    26.71    0.097    2.60    89.3-92.7(4)    0.029-0.048(4) 

 

 

Australasia

                

Australia

                

Sunrise Dam

   14.12    0.030    0.43    9.64    0.086    0.82    80.6    0.032 

Tropicana (70 percent)(3)

   14.48    0.049    0.71    19.50    0.058    1.13    90.3    0.015-0.020(4) 

 

 

Americas

                

Argentina

                

Cerro Vanguardia (92.5 percent)(3) (7)

   8.03    0.028    0.22    8.42    0.119    1.00    61.3-95.4(4)    0.014-0.131(4) 

 

 

Brazil

                

AGA Mineraçáo(2) (8)

   3.43    0.151    0.52    6.25    0.163    1.02    65.0-93.3(4)    0.020-0.132(4) 

Serra Grande(2)

   2.14    0.084    0.18    2.70    0.090    0.24    88.0-94.0 (4)    0.062 

 

 

Total

   214.46    0.024    5.25    1,057.55    0.044    46.42     

 

 
(1) 

Ore Reserve includes marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.

(2) 

Proven and/or Probable Ore Reserve includes Ore Reserve below infrastructure. See table that follows.

(3) 

Ore Reserve attributable to AngloGold Ashanti’s percentage interest shown.

(4)

Recovery factor andcut-off grade vary according to ore type.

(5) 

Tons refers to a short ton, which is equivalent to 2000 pounds avoirdupois.

(6) 

The Vaal Reef Ore Reserve includes 118.38 million pounds of Uranium oxideby-products; this cannot be accounted for by individual mine as Kopanang, Moab Khotsong and Surface sources in Vaal River feed to a combination of plants.

(7)

The Ore Reserve contains 26.01 million ounces of silver to be recovered as aby-product.

(8)

The Ore Reserve contains 0.32 million tons of sulphur to be recovered as aby-product.

(9) 

Great Noligwa is reported under Moab Khotsong.

(10) 

Includes Mine Waste Solutions (MWS).

(11) 

In-situcut-off grade.

(12) 

Ore Reserve is estimated by Competent Persons employed by Randgold Resources Limited.

Rounding may result in computational differences.

 

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The 2015 Proven and Probable Ore Reserve includes Ore Reserve below infrastructure in the case of the following underground mines currently in production:

 

Mine  Tons (millions)  Grade (ounces/ton)  

Gold Content

(million ounces)

Moab Khotsong

  11.29  0.28  3.21

Mponeng

  29.63  0.29  8.56

Kibali

  16.19  0.17  2.73

Obuasi

  2.49  0.63  1.57

AGA Mineração

  1.79  0.16  0.29

Serra Grande

  0.78  0.12  0.09

Total

  62.18  0.26  16.45

The Ore Reserve has been determined based on completed economic studies.

 

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Ore Reserve: Metric At 31 December 2016 
  Proven Ore Reserve (1) (2)  Probable Ore Reserve (1) (2)  Metallurgical  Cut-off 
  Tonnes(6)  Grade  Gold
Content
  Tonnes (6)  Grade  Gold
Content
  Recovery
Factor
  Grade(10) 
  (million)  (g/t)  (tonnes)  (million)  (g/t)  (tonnes)  percent  (g/t) 

 

 

South Africa

        

Vaal River(5)

        

Kopanang

  1.62   5.36   8.70   1.00   5.57   5.55   95.6-95.7 (4)   9.52  

Moab Khotsong (2)

  2.66   8.55   22.73   14.06   9.45   132.81   95.6-96.4 (4)   4.07-5.83(4) 

West Wits

        

Mponeng(2)

  1.21   9.54   11.57   37.62   10.01   376.64   97.4-98.0(4)   4.17-7.14(4) 

TauTona

  0.50   11.07   5.57   2.06   8.32   17.17   96.7-97.0(4)   7.50-8.18(4) 

 

 

Surface

        

Surface sources(5) (9)

  132.64   0.22   28.58   633.79   0.27   170.42   42.0-92.0(4)   0.24-0.38(4) 

 

 

Continental Africa

        

DemocraticRepublic of the Congo

        

Kibali (45 percent) (3) (11)

  1.94   1.90   3.67   29.92   4.17   124.73   84.5-88.9(4)   1.52-2.40(4) 

 

 

Ghana

        

Iduapriem

  2.91   0.76   2.20   42.34   1.30   55.11   92.0-96.0(4)   0.50-0.90(4) 

Obuasi(2)

  0.00   0.00   0.00   21.31   8.01   170.74   89.0    4.40-5.20(4) 

 

 

Guinea

        

Siguiri (85 percent)(3)

  25.50   0.64   16.42   69.01   0.86   59.57   88.0-93.0(4)   0.53-0.75(4) 

 

 

Mali

        

Morila (40 percent)(3) (11)

  0.00   0.00   0.00   6.81   0.55   3.37   57.0    0.47 

Sadiola (41 percent)(3)

  0.01   2.37   0.02   31.62   1.77   55.90   75.0-94.0(4)   0.45-0.80(4) 

 

 

Tanzania

        

Geita

  0.00   0.00   0.00   16.41   3.73   61.17   89.3-92.7(4)   0.95-4.50(4) 

 

 

Australasia

        

Australia

        

Sunrise Dam

  11.67   1.00   11.65   10.56   2.86   30.15   80.9-85.0(4)   0.60-1.23(4) 

Tropicana (70 percent)(3)

  10.98   1.48   16.22   31.09   2.14   66.48   90.0    0.70  

 

 

Americas

        

Argentina

        

Cerro Vanguardia (92.5 percent)(3) (7)

  5.97   1.47   8.78   4.26   4.85   20.65   61.8-95.9(4)   0.46-5.00(4) 

 

 

Brazil

        

AGA Mineraçáo(2) (8)

  3.52   4.81   16.96   6.97   5.20   36.21   70.0-93.3(4)   0.58-3.61(4) 

Serra Grande(2)

  2.41   2.51   6.05   3.20   2.75   8.81   88.5-94.7(4)   2.45  

 

 

Total

  203.54   0.78   159.11   961.37   1.45   1,395.49   

 

 
(1) 

Ore Reserve includes marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.

(2)

Proven and/or Probable Ore Reserve includes Ore Reserve below infrastructure. See table that follows.

(3)

Ore Reserve attributable to AngloGold Ashanti’s percentage interest shown.

(4)

Recovery factor andcut-off grade vary according to ore type.

(5)

The Vaal Reef Ore Reserve includes 56.0 thousand tonnes of Uranium oxideby-products; this cannot be accounted for by individual mine as Great Noligwa, Kopanang, Moab Khotsong and Surface sources in Vaal River feed to a combination of plants.

(6)

Tonnes refers to a metric tonne which is equivalent to 1000 kilograms.

(7)

The Ore Reserve contains 567.38 tonnes of silver to be recovered as aby-product.

(8)

The Ore Reserve contains 0.42 million tonnes of sulphur to be recovered as aby-product.

(9) 

Includes Mine Waste Solutions (MWS).

(10) 

In-situcut-off grade.

(11) 

Ore Reserve is estimated by Competent Persons employed by Randgold Resources Limited.

Rounding may result in computational differences.

 

121


Table of Contents

The 2016 Proven and Probable Ore Reserve includes Ore Reserve below infrastructure in the case of the following underground mines currently in production:

 

Mine  Tonnes (millions)  Grade (grams/tonne)  Gold Content (tonnes)

Moab Khotsong

  10.79  9.59  103.41

Mponeng

  27.53  9.67  266.21

Obuasi

  1.74  23.11  40.26

AGA Mineração

  1.79  6.03  10.79

Serra Grande

  1.07  3.03  3.24

Total

  42.92  9.88  423.90

The Ore Reserve has been determined based on completed economic studies.

 

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Table of Contents
    

 

 
Ore Reserve: Metric At 31 December 2015 
  Proven Ore Reserve (1) (2)  Probable Ore Reserve (1) (2)  Metallurgical  Cut-off 
  Tonnes(6)  Grade  Gold
Content
  Tonnes (6)  Grade  Gold
Content
  Recovery
Factor
  Grade (11) 
  (million)  (g/t)  (tonnes)  (million)  (g/t)  (tonnes)  percent  (g/t) 

 

 

South Africa

        

Vaal River(5)

        

Kopanang

  1.72   6.40   11.02   1.83   6.86   12.52   95.3-95.5 (4)   9.52  

Moab Khotsong(2)(9)

  2.56   8.17   20.90   14.32   9.96   142.67   96.0-96.3 (4)   4.12–6.08(4) 

West Wits

        

Mponeng(2)

  1.71   7.98   13.66   38.29   9.99   382.53   97.6-98.2(4)   4.17–7.14(4) 

TauTona

  0.67   9.83   6.56   3.47   7.54   26.16   97.0-97.3(4)   7.83–7.96(4) 

 

 

Surface

        

Surface sources(5)(10)

  117.25   0.21   24.70   640.39   0.27   172.20   40.0-92.0 (4)   0.21–0.51(4) 

 

 

Continental Africa

        

DemocraticRepublic of the Congo

        

Kibali (45 percent)(2)(3)(12)

  1.82   1.83   3.34   34.12   4.25   145.07   84.5-88.9(4)