AU AngloGold Ashanti
Filed: 28 Mar 18, 8:00pm
As filed with the Securities and Exchange Commission on 29 March 2018
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
|☐||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 2017
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)
(Address of Principal Executive Offices)
Kandimathie Christine Ramon, Chief Financial Officer, Telephone: +27 11 6376019
E-mail: email@example.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:
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
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||410,054,615|
|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 Regulation S-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 a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-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 Rule 12b-2 of the Exchange Act).|
Yes ☐ No ☒
|TABLE OF CONTENTS|
PRESENTATION OF INFORMATION
AngloGold Ashanti Limited
In this annual report on Form 20-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.
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, US$ 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, Australian dollars 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 19 March 2018, the US dollar/South African rand exchange rate as reported by Reuters was R12.01/$1.00.
Non-GAAP financial measures
In this annual report on Form 20-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 and all-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–Financial terms–All-in sustaining costs” and “—Glossary of selected terms–Financial terms–All-in costs”. Nevertheless, AngloGold Ashanti believes that total cash costs, all-in sustaining costs and all-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.|
Management prepares its internal management reporting documentation, for use and decision making by the Chief Operating Decision Maker, on an attributable basis. The key metrics are based on the attributable ounces, gold income, total cash costs, all-in costs and all-in sustaining costs from each operation and as a consequence includes our share of the total cash costs, all-in costs and all-in sustaining costs of our joint ventures that are accounted for on the equity method. In a capital intensive industry, this basis allows management to make operating and resource allocation decisions on a comparable basis between mining operations irrespective of whether they are consolidated or accounted for under the equity method. This basis of calculating the metrics, where costs should be reported on the same basis as sales (i.e. if sales are reported on an attributable basis, then costs should be reported on an attributable basis), is also consistent with the World Gold Council’s Guidance Note on Non-GAAP Metrics - All-in Sustaining and All-In Costs.
Although we have shareholder rights and board representation commensurate with our ownership interests in our equity accounted joint ventures and review the underlying operating results including total cash costs, all-in costs and all-in sustaining costs with them at each reporting period, we do not have direct control over their operations or resulting revenue and expenses, nor do we have a proportionate legal interest in each financial statement line item. Our use of total cash costs, all-in costs and all-in sustaining costs on an attributable basis, is not intended to imply that we have any such control or proportionate legal interest, but rather to reflect the non-GAAP measures on a basis consistent with our internal and external segmental reporting.
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 and all-in costs for each of the three years ended 31 December 2015, 2016 and 2017 is presented herein. See “Item 5: Operating and Financial Review and Prospects—Total all-in sustaining costs, all-in costs and total cash costs”.
Shares and shareholders
In this annual report on Form 20-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.
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.
GLOSSARY OF SELECTED 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 a Pre-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.
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 are sub-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 Resource to Ore Reserve. 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 and stay-in-business capital. This grade is expressed as an in-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 some pre-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 Ore Reserve, 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 Ore Reserve, 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.
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 and re-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.
All-in costs: All-in costs are all-in sustaining costs including additional non-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 the “all-in sustaining costs” metric, which gold mining companies can use to supplement their overall non-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, 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 and non-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 represent 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.
Non-sustaining capital expenditure: Capital expenditure incurred at new operations and capital expenditure related to ‘major projects’ at existing operations where these projects will materially increase production.
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 or if such parties are under common control.
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 from by-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 other non-cash costs. Corporate administration, exploration costs, other operating expenditure and costs reflected as special items 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.
|$, US$, USD, US dollars or dollar||United States dollars|
|A$, Australian dollars or AUD||Australian dollars|
|€ or Euro||European Euro|
|GHC, cedi or Gh¢||Ghanaian cedi|
|ZAR, R or rand||South African rands|
|ADR||American Depositary Receipt|
|ADS||American Depositary Share|
|AIFR||All injury frequency rate|
|ASX||Australian Securities Exchange|
|BBBEE||Broad-Based Black Economic Empowerment|
|BBSY||Bank Bill Swap Bid Rate|
|BEE||Black Economic Empowerment|
|CDI||Chess Depositary Interests|
|CHESS||Clearing House Electronic Settlement System|
|CLR||Carbon Leader 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 and IV||The King Report on Corporate Governance for South Africa|
|Kg or kg||Kilograms|
|Km or km||Kilometres|
|LIBOR||London Interbank Offer Rate|
|M or m||Metre or million, depending on the context|
|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|
|VCR||Ventersdorp Contact Reef|
|XBRL||eXtensible Business Reporting Language|
Note: Rounding of figures in this report may result in computational discrepancies.
ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3: KEY INFORMATION
|3A.||SELECTED FINANCIAL DATA|
The selected financial information set forth below for the years ended and as at 31 December 2017, 2016 and 2015 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 2014 and 2013 has been derived from the IFRS financial statements not included in this annual report.
|Year ended 31 December|
|(in millions, except share and per share amounts)|
|Consolidated income statement|
|Cost of sales||(3,582||)||(3,263||)||(3,294||)||(3,972||)||(3,947||)|
|Gain (loss) on non-hedge derivatives and other commodity contracts||10||19||(7||)||13||94|
|Corporate administration, marketing, other expenses and other income||(64||)||(61||)||(78||)||(92||)||(201||)|
|Exploration and evaluation costs||(114||)||(133||)||(132||)||(142||)||(250||)|
|Other operating expenses||(88||)||(110||)||(96||)||(28||)||(19||)|
|Operating profit (loss)||80||495||337||471||(2,102||)|
|Exchange gain (loss)||(11||)||(88||)||(17||)||(7||)||14|
|Finance costs and unwinding of obligations||(169||)||(180||)||(245||)||(276||)||(293||)|
|Fair value adjustment on issued bonds||—||9||66||(17||)||307|
|Share of associates and joint ventures’ profit (loss)||22||11||88||(25||)||(162||)|
|Profit (loss) before taxation||(63||)||269||257||170||(2,192||)|
|Profit (loss) after taxation from continuing operations||(171||)||80||46||(55||)||(1,955||)|
|Profit (loss) from discontinued operations||—||—||(116||)||16||(245||)|
|Profit (loss) for the year||(171||)||80||(70||)||(39||)||(2,200||)|
|Allocated as follows|
|- Continuing operations||(191||)||63||31||(74||)||(1,985||)|
|- Discontinued operations||—||—||(116||)||16||(245||)|
|- Continuing operations||20||17||15||19||30|
|Basic earnings (loss) per ordinary share (cents)||(46||)||15||(20||)||(14||)||(568||)|
|Earnings (loss) per ordinary share from continuing operations||(46||)||15||8||(18||)||(506||)|
|Earnings (loss) per ordinary share from discontinued operations||—||—||(28||)||4||(62||)|
|Diluted earnings (loss) per ordinary share (cents)||(46||)||15||(20||)||(14||)||(631||)|
|Earnings (loss) per ordinary share from continuing operations||(46||)||15||8||(18||)||(571||)|
|Earnings (loss) per ordinary share from discontinued operations||—||—||(28||)||4||(62||)|
|Dividend per ordinary share (cents)||10||—||—||—||10|
|As at 31 December|
|(in millions, except share and per share amounts)|
|Consolidated balance sheet data|
|Investments in associates and joint ventures||1,507||1,448||1,465||1,427||1,327|
|Trade, other receivables and other assets||67||34||13||20||29|
|Cash restricted for use||37||36||37||36||31|
|Other non-current assets||—||—||18||25||41|
|Trade, other receivables and other assets||222||255||196||278||369|
|Cash restricted for use||28||19||23||15||46|
|Cash and cash equivalents||205||215||484||468||648|
|Non-current assets held for sale||348||—||—||—||153|
|EQUITY AND LIABILITIES|
|Share capital and premium||7,134||7,108||7,066||7,041||7,006|
|Accumulated losses and other reserves||(4,471||)||(4,393||)||(4,636||)||(4,196||)||(3,927||)|
|Environmental rehabilitation and other provisions||942||877||847||1,052||963|
|Provision for pension and post-retirement benefits||122||118||107||147||152|
|Trade, other payables and deferred income||3||4||5||15||4|
|Trade, other payables and deferred income||638||615||516||695||820|
|Non-current liabilities held for sale||126||—||—||—||57|
|Total equity and liabilities||7,219||7,153||7,284||9,134||9,674|
|Number of ordinary shares as adjusted to reflect changes in share capital||410,054,615||408,223,760||405,265,315||404,010,360||402,628,406|
|Share capital (exclusive of long-term debt and redeemable preference shares)||16||16||16||16||16|
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)
|South African cents per ordinary share||130||—||—||—||100|
US cents per ordinary share(2)
|During 2013, the Company changed the frequency of dividend payments to be dependent upon the board’s ongoing assessment of AngloGold Ashanti’s earnings.|
|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.|
|The dividend policy allows the Board, at its discretion, to declare an annual dividend to be based on 10 percent of the free cash flow generated by the business, before growth capital expenditure, for that financial year.|
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 19 March 2018, the exchange rate between South African rands and US dollars as reported by Reuters was R12.01/$1.00.
Year ended 31 December (2)
|The average rate of exchange on the last business day of each month during the year.|
|Based on the exchange rate as reported by Reuters.|
|Through to 19 March 2018.|
Exchange rate information for the months of (1)
March 2018 (2)
|Based on the exchange rate as reported by Reuters.|
|Through to 19 March 2018.|
|3B.||CAPITALISATION AND INDEBTEDNESS|
|3C.||REASONS FOR THE OFFER AND USE OF PROCEEDS|
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 ;|
|•||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 gold 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 and de-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 2017, the gold price traded from a low of $1,158.82 per ounce to a high of $1,348.80 per ounce, remaining well below a peak of $1,900 per ounce in September 2011. Between 1 January 2018 and 19 March 2018, the gold price traded between a low of $1,312.58 per ounce and a high of $1,358.09 per ounce. On 19 March 2018 the afternoon price for gold on the London Bullion Market was $1,316.56 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 the three-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 2015 sell-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.
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 and so-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 the 500-rupee and 1,000-rupee bank notes, as soon-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 several follow-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 not 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 Reserve estimates and corresponding restatements of its Ore Reserve and increased amortisation, reclamation and closure charges.
The spot price of uranium has been volatile in past years. During 2017, the price varied between a low of approximately $19 per pound and a high of $27 per pound. On 19 March 2018, the spot price of uranium was $ 22 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 a ten-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 2017, the price varied between a low of $15.58 per ounce and a high of $18.52 per ounce. On 19 March 2018, the price of silver was $16.30 per ounce.
Factors affecting the price of silver include investor demand, physical demand for silver bars, industrial and retail off-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 volatility in our foreign currency exposure. Such hedging strategies may not 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 2017, 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 $6.0 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 used or 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 fluctuated between $54 and $64 per barrel of Brent Crude in 2017. As of 19 March 2018, the price of oil was at $64 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 $1.00 per ounce. The total cash costs of certain of the company’s mines, particularly Sadiola, Siguiri, Geita, Tropicana, Iduapriem and Kibali 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, fuel duty claims are required to be submitted after consumption of the related fuel and are subject to authorisation by the Customs and Excise authorities. The Minister of Finance and Economic Affairs revoked the Government Notice No. 480 of 2000, as from 1 July 2009. The notice applies to the excise duty exemption on fuel products granted to mining companies. While Anglogold Ashanti believes that this will not affect its status to claim exemption on fuel duty as the duty relief is protected by the Mine Development Agreement (MDA) there can be no assurance of protection under the MDA with respect to future changes to this or other duty exemptions. This has resulted in a cumulative cost impact at AngloGold Ashanti's Geita mine of approximately $25million.
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 19 March 2018, the price of flat hot rolled coil (North American Domestic FOB) was $822 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 projects non-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 adverse 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 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 rainfall and unplanned generation-set outages as a result of maintenance backlog and asset ages. 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 until mid-March of 2008 to curtail power consumption which negatively impacted operational performance.
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 and the company's management expects that these interruptions may resume in the future. Since 2015, the company's South African region has been able to negotiate this period of load shedding with no impact on production due to curtailments using strict energy management and controls.
Since the beginning of 2017, the integrity of power supply to the company’s South African operations has improved due to Eskom's accelerated maintenance schedules and improved reliability as a result of reduced national demand for electricity. The reduced demand is on the back of high tariff increases and the poor economic growth rates experienced over this period.
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. A lower increase of 2.2 percent was approved in February 2017, effective 1 April 2017, but greater tariff increases are expected to be imposed in future years. In June 2017, Eskom announced to consumers that it was aiming for a 19.9 percent tariff increase for 2018 on the back of lower sales and higher costs. On 18 December 2017, after a series of public hearings into the request from Eskom, NERSA rejected their application and granted them an increase of only 5.23 percent stating that Eskom needed to change its operating model and reduce costs for the benefit of the South African economy.
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.
Additionally, Eskom has been mired in allegations of corruption and is the subject of a parliamentary investigation which has implicated a number of its highest ranking executives. It is also running out of working capital, according to reports. As energy represents a large proportion of the company's operating costs in South Africa, these tariff increases have had, and any future increases will have, a materially adverse impact on the total cash costs of its South Africa 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, a two-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 in these countries 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 economic conditions remain fragile with significant uncertainty regarding recovery prospects, levels of recovery and long-term economic growth effects. Concerns remain regarding the sustainability and future 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 the official triggering by the British Prime Minister, Theresa May, of the "Brexit" process in March 2017 and the uncertainty of the resulting terms of the withdrawal and subsequent negotiations. Concerns also exist regarding the negative impacts of the downgrade of the sovereign credit rating of the Republic of South Africa in recent years.
On 24 November 2017, S&P Global downgraded South Africa’s credit rating to full sub-investment grade, while its counterpart Moody’s placed the country on review for downgrade. S&P’s announcement followed a similar announcement by Fitch, affirming South Africa’s rating at sub-investment grade on 23 November 2017. Moody’s decision to put South Africa on review, rather than downgrade it outright, means that South Africa can remain in key global bond indices such as the Citigroup World Bond Index (WGBI). Moody’s held South Africa local and foreign issued debt on the cusp of investment and sub-investment grade. Membership in the WGBI requires that at least Moody’s or S&P Global rates a country’s local currency rating as investment grade. Moody's on 23 March 2018 affirmed South Africa's investment-grade credit rating at Baa3 and revised its credit outlook to stable from negative.
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 including the results of the company's South African operations.
Global economic turmoil, or the expectation that economic turmoil could worsen, could have follow-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|
|•||impairment of operations.|
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 data, AngloGold Ashanti has determined that Argentina was not highly inflationary at 17.8 percent for the year ended 31 December 2017. 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 in that country.
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 the company's 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, permit requirements and delays in the issuance of the necessary permits, 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.
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 an environmentally-protected area, ore body grades, definition of adequate Ore Reserve and Mineral Resource 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 based 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. For example, in February 2018, AngloGold Ashanti announced the maiden Ore Reserve for the Gramalote project, following the completion of an enhanced pre-feasibility study. No assurance can be given that Ore Reserve estimates or other estimates are accurate or that the indicated levels of gold, uranium or other mineral will be produced. 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 affect life-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 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, the maintenance of its existing Ore Reserve net of production or yield 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;|
|•||surface or underground fires or explosions;|
|•||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 and ore-pass blockages;|
|•||water ingress and flooding;|
|•||process water shortages;|
|•||metallurgical conditions and gold recovery;|
|•||unexpected decline of ore grade;|
|•||unanticipated increases in gold lock-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;|
|•||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.
Older mines in the South African region have started to reach the end of their economic lives, several decades after production started. These mines face various systemic challenges, including near-depletion of Ore Reserve, increasing depth and distance from central infrastructure, declining production profiles, and cost escalation that has continued to outpace both inflation and a subdued gold price. The cost performance of certain operations, notably TauTona and Kopanang, has clearly demonstrated these challenges, with all-in sustaining costs for 2017 of $2,242/oz and $1,593/oz respectively. This compared with an average annual gold price over that period of $1,258/oz. Both mines also sustained significant operating losses through 2017. In 2017, TauTona was placed in orderly closure and the sale of Kopanang was announced, with the transaction concluding subsequent to year end.
Seismic activity is of particular concern in underground mining operations, particularly in South Africa due to the extent and 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 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, three rock burst accidents occurred at Mponeng mine during the last quarter of 2017, resulting in four employee fatalities in addition to production losses due to stoppages. The total production loss associated with the three incidents is approximately 14,000m2 (approximately 800 kg of gold with an approximate value of $36 million).
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 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 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.
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 2017, 80 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, 73,208 and 11,324 ounces of gold production from the South African region operations during 2014, 2015, 2016 and 2017 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 AngloGold Ashanti's 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 other web-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 shortages 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, following the outcome of the plebiscite held on 26 March 2017 in the Colombian municipality of Cajamarca, which hosts the company’s La Colosa exploration site, AngloGold Ashanti’s management has taken the decision to pause much of the current fieldwork around the project pending a study of the community’s opposition to the project on AngloGold Ashanti’s planned future investment. In the meantime, AngloGold Ashanti will continue the necessary engagement with all stakeholders to build consensus around the creation of a modern, environmentally responsible gold-mining industry in Colombia.
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 the 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, including non-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.
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.
Closure of a 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, or on a more accelerated or compressed timeline than currently anticipated, and the timing thereof could have a material adverse impact on AngloGold Ashanti’s results of operations and financial condition.
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, in 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. In December 2017, Ibaque's Third Administrative Court ordered a similar technical study. AGAC is in the process of appealing these orders, but if such threat is determined to exist, certain activities at La Colosa may be suspended. See “Item 8A: Legal Proceedings”.
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. 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.
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 discharges of hazardous materials could result in liabilities for clean-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 to water-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 operations. 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.
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 on life-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 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. 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), $705 million in 2016 and $695 million in 2017. 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 based on our commitments in terms of environmental legislation or agreements with government. 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 additional 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 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 requires 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. For example, in South Africa, National Treasury issued the second draft Carbon Tax Bill, on 14 December 2017. The implementation date of the carbon tax will be determined by the Minister of Finance, and is expected through an announcement in 2018, or at the Budget 2019, taking into account the state of the economy. The tax will be phased in with the first phase ending in 2022 and the impact in the first phase designed to be revenue-neutral in terms of its aggregated impact, given the complementary tax energy incentives and reduction or credit for the current electricity levy. In addition, South Africa ratified the Paris Agreement in November 2016 and endorsed its nationally-determined contribution, which requires that greenhouse gas emissions peak in 2020 to 2025, plateau from 2025 to 2035 and decline from 2036 onwards.
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.
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 or energy 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, the European proposal for self-certification for importers of gold, the Organisation for Economic Cooperation and Development Due Diligence Guidelines for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the World Gold Council Conflict Free Gold Standard and the London Bullion Market Association Responsible Gold Guidance have been introduced.
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 results of operations and financial condition.
Mining operations and projects are vulnerable to supply chain disruption such 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 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 no knock-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.
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 U. K. 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). The ICE is independent of the gold market as it does not conduct any trading of gold.
Whilst AngloGold Ashanti 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. Since 2015, when AngloGold Ashanti joined the new oversight committee for the LBMA Gold Price Benchmark which is regulated by the FCA, the volumes being traded through the benchmarks have steadily increased, as have the number of direct participants. Due to some issues around the Silver Price Benchmark, ICE, under the auspices of the Gold Price Benchmark, was asked to assume the duties of managing the Silver Benchmark. As such, the LBMA Gold Price Oversight Committee has now become the LBMA Precious Metals Oversight Committee. If further allegations are made against the Gold Price Benchmark in the future, AngloGold Ashanti 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.
For example, International Financial Reporting Standard (IFRS) 16 Leases was issued in January 2016 and, in comparison to its predecessor International Accounting Standard (IAS) 17 makes significant changes to the accounting treatment for leasing transactions for lessees. IFRS 16 is applicable for all financial years commencing on or after 1 January 2019, with options for full or modified retrospective application.
The approach of IAS 17 was to distinguish between two types of leases. Leases which transfer substantially all the risks and rewards of ownership of an asset were classified as finance leases. All other leases were classified as operating leases. The lease classification set out in IAS 17 was subjective and allowed the preparers of lessee’s financial statements to conclude in certain instances that leases should be classified as operating rather than as finance leases.
Under IFRS 16, however, a lessee is required to recognise right of use assets and lease liabilities, including those of operating leases.The requirements of IFRS 16 may have significant impacts on key accounting ratios of the company. The greater recognition of leased assets and lease liabilities on the statement of financial position will reduce return on capital employed and increase gearing. Initial measures of profit are likely to be reduced, as in the early years of a lease the combination of depreciation of the right of use asset and the finance charge associated with the lease liability will exceed the lease rentals (which have historically been charged on a straight-line basis). This change could have an adverse impact on AngloGold Ashanti's borrowing capacity or credit ratings in the future.
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 U.S. 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, resignation or removal of officers, 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.
Breaches in cybersecurity 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. AngloGold Ashanti outsources several information technology functions and applications to third party vendors and these engagements may have an impact on the overall cybersecurity position of the company. The primary company systems managed by third party vendors include but are not limited to: cloud infrastructure, data centre management, server / personal computing support, enterprise resource programs, email and digital documents and the Cyber Security Operations Centre. AngloGold Ashanti has implemented an Information Security Management System (ISMS) to safeguard the company's IT environment. The ISMS is a framework for the policies, standards and procedures adopted to comply with ISO/IEC 27001:2005, and manages identified cybersecurity related risks.
The company must continuously monitor the solutions implemented to support its global information technology and communication networks and applications to maintain a suitable and well-managed environment. While the security of the company's technical platforms and information systems will be regularly reviewed as part of the compliance initiatives and will be measured against the appropriate security implementation standards and documented security controls, there can be no assurance that these efforts will be successful.
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. For example, in 2017, the business experienced a cybersecurity attack, that compromised a senior manager's email account over a period of approximately four months. While AngloGold Ashanti did not incur monetary loss or experience reputational damage due to this breach, the case has been reported to the Australian Police and is currently under investigation.
Information technology security processes may not prevent future malicious actions, denial-of-service attacks, or fraud, which could result in the corruption of operating systems, theft of commercially sensitive data, misappropriation of funds and business and operational disruption. AngloGold Ashanti's insurance program includes limited coverage for cyber-related crimes and incidents as part of the global insurance program and material system breaches and failures could result in significant interruptions that could adversely 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.
For example, on 25 May 2018 the General Data Protection Regulation (GDPR) will come into force. The GDPR is an European Union (EU) wide framework for the protection of personal data of EU based individuals. The GDPR enhances existing legal requirements through several new rules, including stronger rights for data subjects and mandatory data breach notification requirements, and increases penalties for non-compliance. Failure to comply with the GDPR may lead to a fine of up to four percent of a company’s worldwide turnover or up to Euro 20 million.
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 and economic instability 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 hostile attacks around the La Colosa project’s area of influence. Although a peace agreement with the Revolutionary Armed Forces of Colombia-People’s Army (FARC) 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, serious injuries or loss of product. The risk of a future attack remains a threat and other similar attacks could adversely affect the company’s activities in Brazil.
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 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, and an AngloGold Ashanti employee was killed. Following these events, AngloGold Ashanti withdrew its employees performing non-essential functions from the Obuasi mine. 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 international non-governmental organisations, which poses reputational risk. For example, in April 2017, local community members in Siguiri filed a complaint with the Office of the Compliance Advisor Ombudsman (CAO) raising concerns regarding these resettlement practices and alleging that AngloGold Ashanti provided inadequate compensation post-resettlement and failed to take adequate measures to restore their livelihoods. The CAO is the independent accountability mechanism for the International Finance Corporation (IFC). IFC is a lender to Nedbank, one of the lenders under AngloGold Ashanti’s revolving credit facilities. The company has agreed to work with the complainants, the IFC and Nedbank to try to resolve these issues through a collaborative approach using CAO’s dispute-resolution process.
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. 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 Reserve, 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 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, in July 2017, the Government of Tanzania (GoT) enacted three pieces of new legislation which purport to make a number of changes to the operating environment for Tanzania’s extractive industries, including its mining sector. These changes include, among others: the right for the GoT to renegotiate existing mining development agreements at its discretion; the provision to the GoT of a non-dilutable, free-carried interest of no less than 16 percent in all mining projects; the right for the Got to acquire up to 50 percent of any mining asset commensurate with the value of tax benefits provided to the owner of that asset by the GoT; removal of the refund of input VAT incurred; an increase in the rate of revenue royalties from four percent to six percent; requirements for local beneficiation and procurement; and constraints on the operation of off-shore bank accounts. AngloGold Ashanti and other major mining companies are seeking a constructive dialogue with the GoT regarding this legislation and its impact on existing mining agreements. As a precautionary step to safeguard its interests, AngloGold Ashanti has commenced international arbitration proceedings against the GoT in connection with the enactment of this legislation, as first announced in July 2017. See “Item 8A: Legal Proceedings”. There can be no assurance that the company will be successful in safeguarding its interests in the arbitration action and these changes and any future amendments to the mining legislation could have further adverse effects on the company’s financial condition and profitability.
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 to five percent. Furthermore, the government of Ghana has constituted a review committee to review and re-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.
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. 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.
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 and 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.
For example, in July 2017, AngloGold Ashanti's subsidiaries in Tanzania received a demand for payment of inspection fees on all of their gold shipments and a demand for payment of alleged unpaid service levies. Without payment of the inspection fee, AngloGold Ashanti is not allowed to make any exports. In September 2017, the company received a letter from the Tanzania Revenue Authority (TRA) prohibiting it from claiming input tax credit with effect from July 2017 and AngloGold Ashanti estimates the impact of this change to input tax could result in an increase in annual costs of $50 million. AngloGold Ashanti has agreed to pay the inspection fees on a ‘without prejudice’ basis, has filed an objection with the TRA and is seeking to resolve all of these issues in the ongoing arbitration proceedings in Tanzania described above. There can be no assurance that these proceedings will be successful and the outcomes may have a material adverse impact on the company’s results of operations and financial condition.
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 $132 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, 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 out in-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”.
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 Reserve 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 Reserve 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, 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 where political, tax and economic laws and policies may change rapidly or 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”.
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 early 2018 the DRC announced a new mining code that makes a number of changes to the operating environment for the DRC's extractive industries, including those in its mining and oil and gas sectors. This reform, which received the presidential assent needed for it to be passed into law on 10 March 2018, could have a material adverse impact on the protections enjoyed by AngloGold Ashanti’s projects in the DRC. Among others, the mining code increases AngloGold Ashanti’s tax burden by widening the basis for and increasing the rate of the mining royalties’ rates (the royalty rate applicable to gold increased from two and one-half percent to three and one-half percent). In addition, it increases the DRC government’s free carried interest from five percent to ten percent, with an additional five percent being granted to the DRC government upon each renewal of the exploitation permit, and a requirement that at least 10 percent of the share capital of mining companies be held by DRC individuals. AngloGold Ashanti and other major mining companies are seeking constructive conversation with a working group of the government of the DRC to negotiate transitional agreements, mining regulations, additional royalties and changes to other taxes regarding the mining code, but there can be no assurances that the company's efforts in these discussions will be successful.
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 (the Minister) 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. Papers were filed by the Chamber of Mines of South Africa and the DMR but the matter was not heard in court and was subsequently dismissed.
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 responded to the order and as the DMR has taken no further action, its original notice has lapsed. In June 2017, the Minister gazetted the BBBEE Charter for the South African Mining and Minerals Industry, 2017 (2017 Charter) which came into effect on the same day (Reviewed Mining Charter). The Reviewed 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. It has been challenged by the DMR and the Chamber of Mines and will not be implemented until the High Court of South Africa reaches a decision. On 1 March 2018, the newly appointed Minister indicated that he intends to finalise and publish the New Mining Charter by no later than June 2018. 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, the Reviewed Mining Charter (if implemented) or any future amendments to either the Revised Mining Charter or the Reviewed 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 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. For example, force majeure was declared at the La Colosa project, stopping all activities, following the outcome of the plebiscite held on 26 March 2017 in the Colombian municipality of Cajamarca, which hosts the La Colosa exploration site. The grant of force majeure is for one year and will expire in June 2018, after which such declaration will need to be extended. While the Company plans to make a timely application for an extension, there can be no guarantee that the declaration will be extended. Loss of the force majeure status could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.
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 if 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 the non-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 negatively affect the business results of 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 potential knock-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.
For example, subsequent to the restructuring of the South African operations announcement on 28 June 2017 and based on unsolicited expressions of interest received from a number of parties, AngloGold Ashanti initiated a process to assess the sale of the Kopanang mine. On 28 February 2018, this process successfully concluded with the announcement that Heaven-Sent SA Sunshine Investment Company Limited (HSC), a Chinese capital management company headquartered in Hong Kong, acquired the Kopanang mine, the West Gold Plant and the related infrastructure. The Kopanang mine will continue to operate under the ownership of HSC.
On 19 October 2017, AngloGold Ashanti announced that it entered into a sale and purchase agreement (the SPA), to dispose of various assets situated in the Vaal River region of South Africa to Harmony Gold Mining Company Limited (Harmony) for a cash consideration of US$300 million (the Transaction). The assets and related interests sold included the Moab Khotsong mine (which incorporates the Great Noligwa mine) and related infrastructure (the Moab Mining Sale Assets), AngloGold Ashanti’s entire interest in Nuclear Fuels Corporation of South Africa Proprietary Limited (Nufcor), and AngloGold Ashanti’s entire interest in Margaret Water Company NPC (MWC). The transaction was completed on 28 February 2018, as all the conditions contained in the SPA were fulfilled and the ownership of the Moab Mining Sale Asset has been transferred to Harmony, in addition to all of AngloGold Ashanti’s obligations related to Nufcor and MWC, including in the case of MWC, all of AngloGold Ashanti’s obligations with regards to the pumping and efficient management of the underground water in the Vaal River region (the KOSH Water Directive).
The Transaction consideration received will be utilised by AngloGold Ashanti to further reduce debt and strengthen the company's balance sheet affording AngloGold Ashanti greater strategic flexibility to fund its growth initiatives including its development projects. All of AngloGold Ashanti’s obligations and liabilities (including all employee and health and safety obligations other than any claim related to occupational lung disease for the period prior to the Closing Date), as well as all environmental obligations related to the Moab Mining Sale Assets arising on, before or after the Closing Date were transferred to Harmony.
This risk is also significant in Ghana, where ongoing restructuring and repositioning of the Obuasi mine has 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. In February 2018, AngloGold Ashanti signed regulatory and fiscal agreements with the government of Ghana that will provide the framework for the redevelopment of the Obuasi mine into a modern, productive mining operation. The government of Ghana and the company have put in place several agreements including a development agreement, tax concession agreement, security agreement and a reclamation security agreement. The tax concession agreement and the development agreement must now both be ratified by Ghana's parliament to be made effective. The process requires that the speaker or his deputy formally refer the agreements to the Select Committee of Mines & Energy and the Standing Finance Committee. The two committees will review the agreements and send a report to the main house, upon which parliament would decide on ratification.
The environment impact assessment process has been completed and the permits are pending. The redevelopment is expected to establish Obuasi as a mechanised underground mining operation and is a fundamental departure from how the mine was operated in the past. The redevelopment is expected to make use of automation and controls for improved operational efficiencies and consistency in performance. The project implementation be undertaken in two distinct phases and is expected to take roughly 18
months, with the first gold pour anticipated for the third quarter of 2019. Unforeseen difficulties, delays or costs may adversely affect the implementation of this project and the company may be unsuccessful in meeting this production, cost and return target.
Finally, this risk may also be high in the DRC, in light of the recently announced mining code reform. 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, may turn out to be less effective than anticipated, may only become effective later than anticipated or may 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 to 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.
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, including ramping-up, of key capital projects. For example, in South Africa, the company has been experiencing declining production rates (903,000 ounces in 2017, 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. 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 results of operations, financial condition 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 the company's 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. For example, in South Africa, the emergence and growth 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 a six-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 through the courts challenged the extension of the agreement’s terms to its members. Although the courts found in favour of the mining companies, the success of similar challenges 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. Wage negotiations in other industries and 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 citizens and students about public services and free education; (iii) public outcry relating to racism; and (iv) the effect of confrontations between political parties in the lead-up to elections, all of which may have repercussions in the workplace.
In South Africa, AngloGold Ashanti's 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 Resources will invoke its powers to intervene in any such restructuring process and will be able to place 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 and pro-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.
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.
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 to comply 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 11 of AngloGold Ashanti’s properties, which leads at times to interference with the company’s operations and results in conflict that presents 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 uneconomical. 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 performing non-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 Reserve, mine stoppages, and have other material adverse effects on AngloGold Ashanti’s results of operations or financial condition.
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 qualified mid-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 the 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. 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 a five-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”.
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 2017, AngloGold Ashanti had gross borrowings of $2.190 billion (2016: $2.101 billion), excluding all finance leases.
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 24 November 2017, S&P Global downgraded South Africa’s credit rating to full sub-investment grade, while its counterpart Moody’s placed the country on review for downgrade. S&P’s announcement followed a similar announcement by Fitch, affirming South Africa’s rating at sub-investment grade on 23 November 2017. Moody’s decision to put South Africa on review, rather than downgrade it outright, means that South Africa can remain in key global bond indices such as the Citigroup World Bond Index (WGBI). Moody’s held South Africa local and foreign issued debt on the cusp of investment and sub-investment grade. Membership in the WGBI requires that at least Moody’s or S&P Global rates a country’s local currency rating as investment grade.
Moody's on 23 March 2018 affirmed South Africa's investment-grade credit rating at Baa3 and revised its credit outlook to stable from negative.
Any further downgrade by any rating agency could 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.
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 2017, AngloGold Ashanti reviewed the carrying value of its mining assets, goodwill and intangibles and due to a change in mine plans to restructure the South African operations, certain assets were impaired. In addition, in October 2017, AngloGold Ashanti announced the sale of various South African assets (including the Moab Khotsong mine) which were then written down to fair value less costs to sell. The company booked a charge of $297 million in relation to impairments and derecognition of its mining assets and goodwill. The impairment charge for the Moab Khotsong mine was $112 million.
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. An adverse or arbitrary decision of a foreign court could have a material adverse impact on AngloGold Ashanti's financial performance, cash flow and results of operation.
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. Settlement negotiations in the silicosis class action claims have reached an advanced stage and a provision for silicosis has been made. The carrying value of the silicosis provision at 31 December 2017 was $63m. Significant judgement was applied in estimating the costs that will be incurred to settle the silicosis class action claims and related expenditure and the final costs may differ from current cost estimates. Management believes the assumptions are appropriate, however changes in the assumptions may materially affect the provision and final costs of settlement. There can be no assurance that the ultimate resolution of this matter will not result in losses in excess of the recorded provision and the ultimate settlement may have a material adverse effect on AngloGold Ashanti’s financial position. For further information, see “Item 8A: Legal Proceedings - South Africa - Silicosis litigation”and "Item 18: Financial Statements - Note 1 - Accounting Policies - Provision for silicosis".
It is possible that additional class actions and/or individual claims relating to silicosis and/or other 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. The company’s core mining concession contracts provide that the mining authority has the discretion to declare the underlying concession void if 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. 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’s day-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, financial performance and results of operations.
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, increased 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.
Asset integrity and reliability issues relating to ageing infrastructure are of concern at many of the company's operations, but are of particular concern in South Africa. 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, and in-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 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 to 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, the day-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, may prevent the realisation of the joint ventures’ goals and could adversely affect AngloGold Ashanti's investment in the joint venture or harm the company's reputation. 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.
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 risks 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 other mining companies to engage with government (and other stakeholders) to seek an appropriate industry-wide solution. Settlement negotiations in the company’s silicosis class action claims have reached an advanced stage and a provision for silicosis has been made. 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 33 - 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 in these areas 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. For example, in the West Wits district, Blyvooruitzicht Gold Mining Company was placed in provisional liquidation in August 2013. AngloGold Ashanti secured a court order for access rights to Blyvoor 4 and 6 shafts to keep pumping going. AngloGold Ashanti also incorporated Covalent Water Company, which purchased rights of access and electricity 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 flooding in the future could pose an unpredicted “Force Majeure” type event, which could have an adverse impact on its results of operations and financial condition. Additional infrastructure is being installed at Covalent Water Company 4 Shaft in the B2 decline to mitigate risk and allow pumping closer to source.
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.
In addition, deep groundwater contamination is a significant issue in South Africa, where groundwater in some older mining regions has infiltrated mined-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 Far West Rand goldfields. AngloGold Ashanti’s 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 for deep groundwater contamination 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 could 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.
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 oneERP project for Obuasi Mine in Ghana was approved in February 2018. This project will commence during March 2018 with a planned go-live date of 13 August 2018. The SAP payroll implementation will follow with go-live planned for September 2018. The only remaining site that is not included in the global oneERP system is Sadiola Mine in Mali.
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 28.68 percent and the top 10 largest beneficially owned 43.66 percent of AngloGold Ashanti’s ordinary shares as at 31 December 2017.
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 and such offerings could adversely affect the prevailing market price of the company's securities.
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.
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’ abilities to make decisions about their investment in AngloGold Ashanti.
AngloGold Ashanti’s inability to maintain an effective system of internal control over financial reporting may have an adverse effect on investors’ confidence in the reliability of its financial statements.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the company’s financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Account Standards Board. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by the company in reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding disclosure. AngloGold Ashanti has invested in resources to facilitate the documentation and analysation of its system of disclosure controls and its internal control over financial reporting. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation. If AngloGold Ashanti is unable to maintain an effective system of internal control over financial reporting, investors may lose confidence in the reliability of its financial statements and this may have an adverse impact on investors’ abilities to make decisions about their investment in AngloGold Ashanti. See “Item 15: Controls and Procedures”.
ITEM 4: INFORMATION ON THE COMPANY
|4A.||HISTORY AND DEVELOPMENT OF THE COMPANY|
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.
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:
|•||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.|
|•||Expansion of AngloGold Limited’s operations outside of South Africa.|
|•||Conclusion of the business combination with Ashanti Goldfields Company Limited, at which time the company changed its name to AngloGold Ashanti Limited.|
|•||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.|
|•||Sale by Anglo American plc of its remaining shareholding in AngloGold Ashanti to Paulson & Co. Inc.|
|•||Elimination of AngloGold Ashanti’s hedge book, thereby gaining full exposure to spot gold prices.|
|•||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.|
|•||Commission of two new gold projects - Tropicana and Kibali - in the second half of 2013.|
|•||Sale of the Cripple Creek & Victor gold mine in the USA for $819 million.|
|•||South Africa region restructured - TauTona mine placed on orderly closure. Negotiations of the sales of Moab Khotsong and Kopanang mines during 2017 with the transactions concluding on 28 February 2018.|
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: 2017”, “Item 5A: Operating Results-Capital expenditure” and “Item 5B: Liquidity and Capital Resources”.
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.
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.
Our portfolio of 17 operations and three projects in ten countries, comprises long-life, relatively low-cost operating assets with differing ore body types, located in key gold-producing regions.
Our operations and projects 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, Brazil and Colombia)|
Given the current market environment and the scrutiny of financial capital allocation, we ensure responsible capital distribution, in line with business requirements. We do this while optimising internal expertise to identify and implement operational efficiencies, reducing overhead structures, improving capital discipline and pursuing other business improvement initiatives without compromising safety. We continue our focus on debt reduction to further strengthen our balance sheet and on improving the quality of our portfolio. This we aim to do by unlocking value from existing operations, brownfield opportunities, Obuasi and other long-term growth projects, including Colombia.
Our organisational and management structure aligns with global best practice in corporate governance. By using our human capital efficiently, group support functions cover planning and technical, strategy, sustainability, finance, human resources, legal and stakeholder relations. The planning and technical functions focus on identifying and managing opportunities, maintaining long-term optionality, and ensuring the optimal use of our intellectual capital through a range of activities that includes brownfields and greenfields exploration as well as innovative research focused on mining excellence.
Our exploration programme is aimed at providing an organic growth pipeline to enable us to generate significant value over time.
Greenfields and brownfields exploration takes place in both established and new gold-producing regions through managed and non-managed joint ventures, strategic alliances and wholly-owned ground holdings. AngloGold Ashanti’s discoveries include La Colosa, Gramalote and Quebradona (Nuevo Chaquiro) in Colombia.
Investors added more gold to their portfolios during 2017 as market uncertainty increased and inflation expectations started to rise. Positive momentum held for much of the year, helping to offset the potentially negative impact of anticipated interest rate increases in the US, with the gold price averaging $1,258/oz over the 12 months compared with $1,249/oz in 2016. It touched a low of $1,158 in 2017 and reached a high of $1,348/oz for the year. The gold price closed the year at $1,306/oz. Continued gold investments into portfolios, with inflows into global gold-backed exchange-traded funds totalled $8.2bn or 6.72Moz, compared with 14.18Moz in 2016.
Speculators increased their gold net long position by 7.36Moz year-on-year on the Comex commodity exchange, further underpinning the positive sentiment in the gold market.
Stock markets globally ended the year at or near record highs. The MSCI All-Country World Index gained 22 percent or nine trillion, during 2017, a new high, as global growth accelerated and investors bet on continued improvements to corporate earnings. Additionally, the US Tax Cuts and Jobs Act and the US Federal Reserve’s gradual approach to normalising monetary policy further buoyed equity markets. These record valuations coincided with continued strength in most other asset classes in developed markets,
including property, bonds and alternatives like collectibles and cryptocurrencies, though some of the enthusiasm over the latter has waned in 2018.
Monetary policy tightening across the globe pushed up global short-term bond yields while long-term yields remained relatively flat. The US Federal Reserve increased interest rates three times during the year, while the Bank of England lifted its benchmark rate during November for the first time in a decade to 0.50 percent (from 0.25 percent). In March 2017, the European Central Bank (ECB) claimed victory over deflation and signalled that its monetary policy would become gradually less expansionary.
Bond markets remained stable, with increased investments in emerging market sovereign debt, as compared to government debt in developed countries, where yields were down in 2017. As a result, emerging market currencies strengthened and borrowing rates from these countries remain at or near multi-year lows.
In 2017, the global volatility index traded at historically low levels, despite the impact of various political events including geopolitical concerns about a US-led nuclear war with North Korea, political upheaval in Europe with the Catalan separatist movement in Spain, a continued swing to the right in several EU member states and an inconclusive German election.
The US dollar price of gold rose 13 percent from the first to the last trading day of the year, its biggest annual gain since 2010, outperforming most major asset classes (other than stocks). Aside from the tailwinds from geopolitical uncertainty, gold prices were supported by a weakening US dollar and elevated equity valuations, which created concern over a potential market correction. Debt investors were also likely concerned about a record bull market that was threatened by the increasing prospect of a normalisation in interest rates in the US. The geopolitical instability further heightened investor uncertainty and fuelled investments in gold, which remain a hedge against these risks.
Central banks were also very active in the gold market, with Russia increasing its holdings, particularly in the last two months of the year. The central banks remained an important source of demand for gold and net purchases by central banks recorded a gain of 48 percent for the whole of 2017, up 123t to 381t compared to 258t in 2016.
Jewellery consumption for 2017 was up 13.2 percent compared to 2016, with all major physical consumer regions recording year-on-year gains. India’s jewellery consumption increased by 8 percent in the last quarter of the year, helped by a surge in sales during Dhanteras (the first day of Diwali) and lower prices toward year end. Jewellery fabrication also increased 5.5 percent in 2017 from 2016. Chinese demand slipped 2 percent year-on-year, with ongoing losses in the pure gold segment as consumer preferences continued to shift towards more fashionable pieces with lower gold content. It is worth adding that after posting double-digit percentage declines on average since its 2013 peak, China’s jewellery offtake appeared to have finally stabilised in 2017. Total physical demand increased on an annual basis, with physical demand up 10.6 percent from 3,555.9t in 2016 to 3,931.6t in 2017.
Gold supply was broadly unchanged and mine production rose fractionally to 3,268.7t in 2017 (2016: 3,236.0t), while there was net dehedging of 30.4t. Recycling levels declined by 10 percent year-on-year to 1,160t in 2017 as mine production was offset by reduced hedging activity, while scrap volumes remained flat year-on-year.
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”.
However, gold producers do compete against each other for acquisition of mining assets, exploration opportunities and human resources. See “Item 3D: Risk Factors”.
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 the ramp-up of operations after annual holiday production declines.
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.
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 efficient day-to-day operation of our business we must keep an eye on creating a competitive pipeline of long-term opportunities.
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 in day-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.
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 such mining rights”, “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”, “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”.
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 technical co-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.
On 27 December 2012, the Minister published the Draft Mineral and Petroleum Resources Development Bill, 2012 (2012 Bill) which sought to amend the MPRDA again 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 and MPRDAA, to, amongst other things:
|•||provide for regulation of associated minerals, partitioning of rights, and enhanced provisions on mineral beneficiation;|
|•||promote national energy security;|
|•||streamline administrative processes; and|
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 a case-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 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, President Zuma referred the 2013 Bill back to the National Assembly to accommodate his reservations around the constitutionality of the 2013 Bill. The 2013 Bill was considered by the Portfolio Committee on Mineral Resources who tabled non-substantial revisions to the 2013 Bill, which revisions were passed by the National Assembly and referred to the NCOP on 1 November 2016. The 2013 Bill is currently being considered by the NCOP select committee on Land and Mineral Resources after 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 current President, Cyril Ramaphosa, for assent, it is not clear if the current President will view the earlier reservations around the constitutionality of the 2013 Bill to have been addressed and whether the 2013 Bill might be referred 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. President Ramaphosa announced in his State of the Nation Address on 16 February 2018 that processing of the 2013 Bill through both houses of Parliament was at an advanced stage, with an indication by Parliament that the 2013 Bill is expected to be finalised during the first quarter of 2018.
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 of non-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.|
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;|
|•||mine community and rural development;|
|•||housing and living conditions;|
|•||ownership and joint ventures;|
The Scorecard attached to the Revised Mining Charter made provision for a phased-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 AngloGold Ashanti’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 announced that the 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 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), but the matter was not heard in court and was subsequently postponed.
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. This application was dismissed.
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 the non-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 the non-compliance notice. The DMR provided no further response and, consequentially, the notice has lapsed.
On 15 June 2017, the Minister gazetted the Broad-Based Black Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2017 (2017 Charter), which came into effect on the same day (Reviewed Mining Charter). The Reviewed 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. The Chamber of Mines launched an urgent application to interdict the implementation of the Reviewed Mining Charter and set it aside. The DMR filed papers in court and the urgent application was due to be heard in court on 14 September 2017. However, the Minister and the Chamber of Mines reached an agreement on 13 September 2017 wherein the Minister undertook to suspend the 2017 Charter pending the outcome of DMR/Chamber of Mines application. The DMR/Chamber of Mines application was set to be heard in February 2018, but has now been postponed indefinitely on the basis that the Chamber of Mines has entered into a new round of negotiations with the DMR, facilitated by President Ramaphosa.
In the event that these negotiations are unsuccessful and the court upholds the Reviewed Mining Charter in its current form, existing and new holders of mining rights will need to comply with the requirements stipulated therein. Below are requirements introduced by the Reviewed Mining Charter:
|•||The Reviewed Mining Charter introduces the new definition of “Black Person” which it defines as a generic term to mean Africans, Coloured and Indians who are citizens of South Africa by birth or decent; or who became citizens by naturalisation before 27 April 1994 or on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to the date; and juristic persons managed and controlled by Black Persons who collectively or as a group own and control all issued share capital or members’ interest and are able to control the majority of the members’ vote.|
|•||South African mining companies who held prospecting rights and mining rights prior to the coming into effect of the Reviewed Mining Charter must top up their Black Person shareholding within 12 months of the coming into effect of the Reviewed Mining Charter by four percent in order to achieve 30 percent Black Person (or company) shareholding, to enable meaningful economic participation of black people in the industry.|
|•||New applicants for mining rights must meet the 30 percent ownership by Black Persons threshold whereby the empowerment partner holding 14 percent ownership, and the community trusts and employee ownership schemes holding 8 percent each.|
|•||New applicants for prospecting rights must be Black-owned entities (50 percent +1 vote Black person shareholding).|
|•||The 30 percent Black Person shareholding requirement may be offset by a maximum of 11 percent against its contribution and financial investment in beneficiation in South Africa, subject to certain requirements.|
|•||Mining companies must procure 70 percent of mining goods (which includes capital goods and consumer goods), 80 percent of services and 70 percent of consumables goods from South African Black-owned entities (50 percent + one vote Black Person shareholding).|
|•||Non-South African suppliers of capital goods must annually contribute one percent of their annual income generated from local mining companies towards the Mining Transformation and Development Agency (to be established).|
|•||Holders of mining rights must employ South African based companies to analyse all mineral samples across the mining value chain and may only use non-South African companies with consent from the Minister.|
|•||Mining companies must achieve a minimum representation of Black People in the following management positions: 50 percent on the Board of directors (25 percent of which must be Black women), 50 percent in executive (25 percent of which must be black women), 60 percent in senior management (30 percent of which must be black women); 75 percent in middle level (38 percent of which must be black women); 88 percent in junior level (44 percent of which must be black women) and 60 percent in core and critical skills. In addition; Black People with disabilities must constitute three percent of all employees.|
|•||The mining industry must continue to invest up to five percent of its leviable amount (meaning the amount an employer pays to an employee during any month to determine the employer’s liability for employee tax) in skills development activities. two percent of such investment must be paid towards the Mining Transformation and Development Agency.|
|•||One percent of the annual turnover of mining companies who apply for mining rights after the Reviewed Mining Charter comes into effect must be given the BEE shareholders over and above any distributions to the shareholders of that company. The transitional period in which mining companies must comply with the procurement related provisions Reviewed Mining Charter is three years, with the possibility of requesting a further two years from the DMR to achieve compliance.|
The Reviewed Mining Charter states that requirements for ownership, mine community development and human resource development are ring-fenced and require 100 percent compliance at all times.
In addition, mining entities with permits / licences granted under the Precious Metals Act, 2005 and the Diamonds Act, 1986 must comply with following requirements/targets of the Reviewed Mining Charter:
|•||exempted micro enterprises must comply with sustainable development and growth of the mining industry targets;|
|•||small enterprises must comply with employment equity, human resource development, procurement/supplier and sustainable development targets; and|
|•||medium and large entities must comply with ownership, employment equity, human resource development, procurement/ supplier and sustainable development targets.|
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. The Reviewed Mining Charter proposes the repeal of paragraph 3 of the Code which provides for application of the Code of Good Practice for permits/licences granted under the Precious Metals Act, 2005, and the Diamonds Act, 1986.
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 (Financial Provision Regulations, 2015), and now fall under NEMA.
The 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;|
|•||before the coming in to effect of the Financial Provision Regulations, 2015 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 Financial Provision Regulations, 2015 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 Financial Provision Regulations constitutes non-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 Financial Provision Regulations, 2015 including
|•||confusion regarding the applicability of the Financial Provision Regulations, 2015 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 Financial Provision Regulations, 2015 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 was published in November 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.
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.
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 Resource (such as uranium) constitute less than 10 percent in value of the total composite Mineral Resource, the royalty rate in respect of refined Mineral Resource may be used for all gross sales and a separate calculation of EBIT for each class of Mineral Resource is not required. For AngloGold Ashanti, this means that currently the company will pay a royalty based on refined Mineral Resource (as the unrefined Mineral Resource (such as uranium) for AngloGold Ashanti for 2016 constituted less than 10 percent in value of the total composite Mineral Resource). The rate of royalty tax payable for 2016 was 0.50 percent of revenue of the company’s South African operations.
The President appointed the Davis Tax Committee (DTC) to review the current mining tax regime. In the Second and Final Report on Hard Rock Mining, a DTC report released in November 2017, the DTC recommended an update and refinement of the schedules in the Royalty, suggesting it should form part of regulations made by the Minister in the government gazette rather than forming part of the legislation itself. The DTC called upon the South African Revenue Service to issue a comprehensive interpretation notice on the Royalty Act to dispel industry uncertainty.
Some of the other preliminary recommendations of the committee have included the upfront capital expenditure write-off regime being discontinued and replaced with an accelerated capital expenditure depreciation regime, which is in parity with the write-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 to non-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.
On 27 February 2018, the National Assembly resolved to assign the Constitutional Review Committee (CRC) to review section 25 of the Constitution of the Republic of South Africa (Constitution) and other clauses where necessary to allow the state to expropriate land in the public interest without compensation. The CRC has been given until 30 August 2018 to report back to the National Assembly. This resolution follows the African National Congress’s (ANC) resolution at its elective conference in December 2017 to pursue expropriation of land without compensation in a manner that does not destabilise the agricultural sector, endanger food security or undermine economic growth and job creation. It is unclear at this stage what recommendations the CRC will make in its report or how the proposed expropriation of land without compensation will affect AngloGold Ashanti’s operations. The MPRDA entrenches a statutory right of access for the mining right holder to the mining area for the purposes of conducting mining operations and does not require the mining right holder to own the land on which it conducts operations. Once a mining right is granted, the landowner has no right to refuse the conducting of mining operations on the property in question and is not entitled to compensation from the mining right holder for the use of the land for mining operations conducted in terms of the MPRDA.
Democratic Republic of the Congo
The mining industry in the Democratic Republic of the Congo (DRC) is currently undergoing a reform as the Mining Code enacted in July 2002 and which, until recently, was the primary regulation in the mining sector, was amended by Law no 18/001, as adopted on 29 January 2018 and as enacted by the President of the Republic on 9 March 2018 (the Reformed Mining Code). The Reformed Mining Code calls for the adoption of regulatory texts, including the amendment and update of the Mining Regulations, originally promulgated in March 2003 to support the 2002 Mining Code. These regulatory texts are being drafted and negotiations between major mining companies and the DRC Government are ongoing in their respect. In its current form, the Reformed Mining Code increases the title holders’ tax burden by widening the basis for and increasing the rate of the mining royalties’ rates (the royalty rate applicable to gold increased from two and one-half percent to three and one-half percent). The Reformed Mining Code also
introduces a 50 percent windfall tax and increases customs and other entry and export duties, in addition to introducing a community contribution of 0.3 percent of total turnover. In addition, the Reformed Mining Code calls for an increase of the State’s free carried interest from five percent to ten percent, with an additional five percent being granted to the State upon each renewal of the exploitation permit, and a requirement that at least 10 percent of the share capital of mining companies be held by DRC individuals. Finally, the Reform Mining Code further restricts existing exchange control rules, by requiring that 60 percent of sale revenues be repatriated onshore during the investment amortization period, after which repatriation requirements apply to 100 percent of sales revenues. The Reformed Mining Code also clarifies that the Law n°2017-01 of 8 February 2017 on subcontracting in the private sector, which introduced a more stringent subcontracting regime, fully applies to the mining sector. Discussions are currently ongoing between the mining industry and the DRC authorities as to protection to be afforded to title holders benefiting from a 10-year stability provision under the 2002 Mining Code.
The Reformed Mining Code continues to vest 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 five years or in the form of mining permits which are granted for an initial period of 25 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 Reformed Mining Code provides, depending on the nature of a dispute or threat, administrative, judicial and national or international arbitral recourses.
The Reformed 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 and exchange control provisions applicable to the mining activities are guaranteed to remain unchanged, for a period of 5 years from the enactment of the Reformed Mining Code.
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 a non-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.
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.
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.
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;|
|•||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 until April 2019, which is 15 years after the completion of the business combination.
AngloGold Ashanti (Ghana) Limited has negotiated a new Development Agreement (DA) and Tax Concession Agreement (TCA) in relation to the Obuasi Mine with government. These agreements, which govern the redevelopment of the Obuasi Mine, have not yet received parliamentary approval. Once approved, the current Stability Agreement will cease to apply to the Obuasi Mine but will continue to apply to the Iduapriem Mine until it expires in April 2019.
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.|
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 voluntary winding-up or voluntary liquidation of AngloGold Ashanti (Ghana) Limited;|
|(iii)||the redemption of or purchase by AngloGold Ashanti of the Golden Share;|
|(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 a winding-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.
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 by non-residents, payments to non-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 two and one-half 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.
The Value Added Tax (Amendment) Act, 2017, (Act 948) was passed to amend the Value Added Tax 2013, (Act 870). The Amendment, among other changes, classifies the supply of financial services and gives legal backing to a three percent VAT Flat Rate Scheme (FRS).
The FRS applies to all wholesalers and retailers including suppliers who import to resell on wholesale or retail. Prior to the introduction of the FRS, suppliers were allowed to charge 17.5 percent against the output tax charged on the value of their supplies. However, suppliers are currently prohibited to charge the 17.5 percent under the new scheme. Hence the 17.5 percent is rather inculcated into the price of goods/ products supplied, passing on the costs to the consumer. Thus, goods purchased by AngloGold Ashanti from its suppliers fall within this bracket and have turned out to be more expensive than previously.
The Value Added Tax (Amendment) (No. 2) Act, 2017, (Act 954) was enacted to amend the Value Added Tax 2013, (Act 870) to remove tax on stakes in the National Lotto, to provide for withholding from the payment of VAT to registered VAT traders.
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.
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) provides new tax rates on the chargeable income of resident individuals for a year of assessment, introduces a 15 percent withholding tax rate applicable to service fees with a source in Ghana to resident individuals for services other than those expressly provided for under Act 902 and increases the monetary threshold for an individual to whom a presumptive tax applies. Presumptive tax payable on turnover is now three percent of the business where the turnover is more than GHS 20,000 but does not exceed GHS 200,000 (instead of the initial presumptive tax of three percent payable where the turnover was more than GHS 20,000 but did not exceed GHS 120,000); and|
|•||Income Tax (Amendment) Act 2016 (Act 907) exempts from tax, interest and dividends paid to an investor in an approved unit trust scheme or mutual fund, and also reduces withholding tax on service fees payable by a resident person, other than an individual, to another resident person from 15 percent to seven and one-half percent.|
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 of seven and one-half percent to 15 percent to a fixed rate of five percent. The rate of tax imposed on the chargeable income of a non-resident temporary worker is 20 percent. A resident temporary worker’s chargeable income is taxed as follows: the first GHS 2,592 is exempt from tax, the next GHS 1,296 is subject to five percent tax, the next GHS 1,812 is subject to 10 percent tax, the next GHS 33,180 is subject to 17.5 percent tax and any amount exceeding GHS 38,880 is subject to 25 percent tax.
Further amendments have been made to the ITA as follows:
|•||The Income Tax (Amendment) Act, 2017 (Act 941) provides for the exemption from tax of the gains from the realisation of securities listed on the Ghana Stock Exchange.|
|•||The Income Tax (Amendment) (No.2), Act 2017, Act 956 provides for accelerated capital allowance for manufacturers and importers of stamping machines for the implementation of the excise tax stamp policy and also exempts from tax for five years, the income of an entrepreneur (who is not more than 35 years old) from the business of manufacturing, information and communications technology, agro processing, energy production, waste processing, tourism and creative arts, horticulture and medicinal plants.|
Tax Amnesty Act, 2017 (Act 955) grants amnesty to persons who have failed to register with the Commissioner-General or file their tax returns or pay taxes as required by enactments administered by the Commissioner-General. Under Act 955, the Commissioner-General is prohibited from assessing or recovering taxes, penalties and interests in respect of previous years up to and including the 2017 year of assessment, where the defaulting party on or before September 30, 2018 registers with the Ghana Revenue Authority and files income tax returns for the 2014, 2015 and 2016 years of assessment.
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 by non-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 on over-the-counter foreign exchange cash withdrawal is removed.|
|•||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 use non-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.
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.
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. The Special Import Levy (Amendment) Act, 2017 (Act 944) was passed to remove the levy payable on some petroleum products, fertilizer and certain types of machinery and equipment.
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.
The Customs and Excise (Petroleum Taxes and Petroleum Related Levies) Repeal Act, 2017 (Act 943) was passed to repeal the Customs and Excise (Petroleum Taxes and Petroleum Related Levies) Act, 2005 (Act 685). Act 685 revised duties, taxes and levies on specified petroleum products.
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.
Directive from Commissioner of Customs
A Directive was issued from the Minister of Finance requiring persons who qualify for exemptions from import duties and taxes to make prior payment at the ports and subsequently apply for a refund.
Tax Stamp Policy
This was launched pursuant to the Excise Stamp Act, 2013 (Act 873). Act 873 requires the manufacturer or importer of goods for which Excise Tax Stamp is required to bear the cost of the stamp. The cost of the stamp may be subsidized as the Minister for
Finance may determine. The policy makes provision for the Government to bear the entire cost of the stamp for the first half of the year 2018 and to bear half the cost for the second half of the year. The Government will review its position on the cost burden after 2018.
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.
The Energy Sector Levies (Amendment) 2017 (Act 899) amends Act 899 by a downward review of the National Electrification Scheme Levy from five percent to two percent and the Public Lighting Levy from five percent to three percent per price of kilowatts of electricity charged for all categories of consumers.
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.
Notification of the Minerals Commission - Expatriate Visitors to Mine Sites
The Minerals Commission issued a directive to all mining companies and mine support service providers to notify the Commission of all expatriate visitors to mine sites pursuant to the Minerals and Mining (General) Regulations 2012 (LI 2173) and the Minerals and Mining (Support Services) Regulations 2012 (LI 2174).
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.
Local Governance Amendment Act, 2017 (Act 940)
The Local Governance Amendment Act, 2017 (Act 940) was introduced to restore the President’s discretionary power to revoke the appointment of government appointees to District Assemblies. The Act will also speed up the appointment processes to enable District Assemblies to perform effectively and forestall further delay of appointments to District Assemblies.
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 (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.
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.
Office of the Special Prosecutor Act, 2017 (Act 959)
Act 959 was passed to establish the Office of the Special Prosecutor as a specialised agency to investigate specific cases of alleged or suspected corruption or corruption-related offences involving public officers and politically exposed persons in the performance of their functions as well as persons in the private sector involved in the commission of alleged or suspected corruption and corruption-related offences and to prosecute these offences on the authority of the Attorney General.
Special Petroleum Tax Act, 2014 (Act 879)
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. The tax rate was reduced from 17.5 percent to 15 percent in 2017 pursuant to the Special Petroleum Tax (Amendment) Act, 2017 (Act 942).
Paragraph 855 of the Budget Statement for 2018 indicates the Government of Ghana’s intention to adopt a policy to leverage Ghana’s gold deposits to attract additional funding for accelerated growth and development and to minimize exposure to the volatile price of gold. The government intends to accomplish this by using factoring (an up-front payment instrument).
The Multilateral Mining Integrated Project (MMIP)
The MMIP is a five-year project underway by the Government of Ghana to address illegal and unsustainable mining practices in Ghana. Commenced in mid-2017, the MMIP “combines a Legislation, Enforcement, Civil, Integrated and Technological Approach (LECITA) as a sustainable and structured yet regimented conjoint concept” to combat with illegal mining. The MMIP involves (i) reviewing and enforcing of the legal and regulatory regime of the small scale mining sector, (ii) reclaiming and rehabilitating degraded lands, (iii) dredging silted estuaries and waterways, (iv) implementing social interventions to facilitate livelihood creation in mining communities, (v) adapting technology to increase mining efficiency, processing, environmental and monitoring activities, and (vi) building the capacity of artisanal and small-scale miners and regulatory institutions.
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.
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 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.
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. In 2017, the modalities regarding the use of the mining companies’ financial contribution to the development of the local communities and the rules applying to the Local Development Fund (Fodel) created under the Mining Code have been enacted through the adoption of decree D/2017/285/PRG/SGG setting the conditions for the constitution and management of the Fodel, dated 31 October 2017 and the joint order A/2017/6326/MMG/MATD/SGG setting out the conditions for the use, management and control of the Fodel, dated 22 November 2017. Also, a joint order AC/2017/3228/MATD/MMG/SGG updating the act on the establishment, attribution and functioning of the coordination committees in mining communities (CCLMS), dated 21 July 2017 has been issued by the Ministry of Territorial Administration and Decentralisation and the Ministry of Mines and Geology. The main purpose of the CCLMs, in which all concerned mining companies are represented, being to prevent and settle disputes that may arise in mining communities.
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.
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 percent free-carried/non-contributory interest;|
|•||the Republic of Guinea is entitled to a royalty on gold of five percent 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: three percent if the gold price is USD 1,300 or less, five percent, if above USD 1,300 and up to USD 2,000 and seven percent 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 percent;|
|•||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.
Mineral rights in Mali are governed by law n°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 ordinance n°013/2000/P-RM of 10 February 2000 and ratified by law n°00-011 of 30 May 2000 (1999 Mining Code), and Decree No. 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 (subject to the developments regarding the permit for Yatela, below). Morila, Sadiola and Yatela have 30-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 has begun the implementation of a closure plan in order to relinquish the property. In parallel, discussions have been ongoing for the Government of Mali to take over the residual operations as well as the implementation of the closure plan. In the course of these discussions, an administrative error occurred, leading to the cancellation of Yatela’s permit through decree 2017/0613/PM-RM dated 28 July 2017, notified to Yatela on 5 October 2017. Attempts have been made to correct this error, notably through decree 2017-00951/PM-RM dated 28 November 2017 which purports to abrogate the 28 July 2017 cancellation decree. This measure is considered to be insufficient and other legal options are being explored in collaboration with the Malian authorities to cure this administrative error and to fully restore the permit for Yatela.
Mineral rights in the United Republic of Tanzania are principally governed by the Mining Act of 2010 (Tanzania Mining Act), as amended in 2017, and the Mining Regulations, 2010 (Tanzania Mining Regulations), as amended in 2018, which include: Mining (Mineral Rights) Regulations 2018; Mining (Environmental Protection For Small Scale Mining) Regulations 2010; Mining (Mineral Beneficiation) Regulations 2018; Mining (Minerals and Mineral Concentrates Trading) Regulations 2018; Mining (Safety, Occupational Health and Environmental Protection) Regulations 2010; Mining (Radioactive Minerals) Regulations 2018, Mining (Local Content) Regulations, 2018, the Mining (Geological Survey) Regulations, 2018, and the Mining (Audit and Inspection of Records) Regulations, 2018.
The Tanzania Mining Act and the Tanzania Mining Regulations came into force in November 2010 followed by amendments to the Mining Act of July 2017 and subsequent amendments to the Tanzania Mining Regulations in January 2018. 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 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; and|
|•||gemstone prospecting 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:
|•||smelting licence; and|
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):
|•||gemstones other than kimberlitic diamonds; and|
An application for a prospecting licence is made to the Mining Commission and the licence is valid for a period of four years. After the initial term, the licence is renewable for a further period, but there is no option to renew after the first renewal. 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.
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.
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 Mining Commission must be notified of any transfer of a prospecting 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 grant and assignment of a special mining licence generally requires the approval of the Cabinet after the Mining Commission has forwarded the application to the Minister for further approval. There are limited exceptions to the requirement for the licensing authority’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 (GoT) 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 an off-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.
New labour law requirements
On 15 September 2015, the Non-Citizens (Employment Regulation) Act (the Non-Citizens Act), 2015 came into force. The Non-Citizens Act vests powers concerning work permit with the Labour Commissioner. Therefore non-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, the Non-Citizens Act introduced the Short-Term Permit (STP). The STP is granted to non-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 GoT. 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 Tanzania Mining Act and the Mining Regulations
The Tanzania Mining Act (Mining Act) was amended in July 2017 followed by an amendment of the Mining Regulations in 2018, together with an Executive Order introducing the following:
|•||Dissolution of the Tanzania Minerals Audit Agency (TMAA). All of TMAA’s functions and powers are now transferred to the Geological Survey of Tanzania (GST).|
|•||Dissolution of the Mining Advisory Board and introduction of the Mining Commissions. The functions and powers of the Mining Advisory Board have been taken over by the Mining Commissions including the functions of the Commissioner for Minerals. However, the Mining Commissions have been made responsible for matters related to auditing and monitoring of mineral production in Tanzania. The Mining Commissions have 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. Mineral rights holders were required to submit all geological information in their possession to the GST.|
|•||A local content requirement for procurement of goods and services: the Mining Act requires that mining companies must give: (i) first consideration to good and services provided or manufactured in Tanzania where they meet mining industry specifications (established by the Standards Authority / internationally acceptable standards), (ii) first consideration for employment to qualified Tanzanians and (iii) adequate provision for on-the-job training of Tanzanians. Specific minimum local content thresholds are specified in Schedule 1 to the Mining Regulations. These will be determined by the Commission alongside the work programme. The Minister may prescribe additional minimum local content thresholds.|
|•||Mining Licence: To qualify for holding a Mining Licence in Tanzania, five percent of a licensee’s equity must be held by Tanzanians, with 80 percent of its managerial positions held by Tanzanians and 100 percent of other positions held by Tanzanians), in addition to the shareholding of the GoT pursuant to Section 10 of the Mining Act (i.e. free carried interest). This amount is determined, and may be varied, by the Minister.|
|•||Establishment of the Local Content Committee (LC Committee) which will oversee the implementation of the Mining Regulations and which comprised of a member of the Commission, the Director of Labour and Employment, a member of the Tanzania Private Sector Foundation, the CEO of the Geological Survey of Tanzania, the head of legal services at the Ministry for Minerals and the Executive Secretary of the Commission. The LC Committee sets minimum standards for local content plans and reports to the Commission.|
|•||Cancellation of retention licences; right over these revert to the GoT.|
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. On 10 January 2018, the GoT published its new Mining Regulations, 2018, which contain, amongst others, the implementation provisions of the amended Mining Act.
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. 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.
Along with other major mining companies, AngloGold Ashanti’s subsidiaries are seeking a constructive dialogue with the GoT to gain assurances that the Geita Gold Mine will not be affected by these legal and fiscal changes, given the Mine Development Agreements which guarantee fiscal and regulatory stability as well as agreement between all parties before material legal and regulatory changes are made. As a precautionary step to safeguard its interests, AngloGold Ashanti has commenced international arbitration proceedings against the GoT in connection with the enactment of this legislation, as first announced in July 2017.
The arbitration action against the GoT seeks declaratory relief in accordance with the terms of the Mine Development Agreements to preserve the companies’ and their shareholders’ rights and interests in the Geita Gold Mine, including confirmation from the GoT that the companies are exempt from the listing requirement. The arbitration proceedings also seek to confirm that AngloGold Ashanti does not, as a result of its existing mining agreements, fall within the scope of the new mining legislation, under which the GoT has the right to renegotiate existing mining agreements at its discretion, the right to receive free-carried interest of no less than 16 percent in all mining projects, the right to acquire up to 50 percent of any mining asset commensurate with the value of tax benefits provided by the owner of the asset and which includes an increase in the rate of revenue royalties from four to six percent. AngloGold Ashanti can provide no assurance that the new mining legislation, including the listing requirement, will not apply to its operations in Tanzania and the outcome of the arbitration action may have a material adverse impact on the company’s results of operations and financial condition.
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.
Natural Resources Legislation in Tanzania
The government of Tanzania enacted two Natural Resources laws that came into force in July 2017. The two laws are The Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act, 2017 and The Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 (together, the Natural Resources laws).
The Natural Resources laws require that all arrangements or agreements that relate to “natural wealth and resources” are subject to review by the National Assembly. In the review, all unconscionable terms as interpreted in accordance with the law are expunged from the agreement. The laws also require that new natural resources agreements to be reviewed by the Government.
In addition, under the laws, disputes over natural wealth and resources will not be subject to any proceedings in any foreign court or tribunal. Accordingly, companies are now required to adopt Tanzanian law and local dispute resolution in all mining agreements. Every undertaking must demonstrate “guaranteed returns into the economy” from all earnings accrued or derived from such extraction, exploitation or acquisition and use. In addition, to ensure that the Government and the people of Tanzania obtain equitable stake in the exploitation of mining resources, all project earnings must be retained in Tanzanian banks.
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 tenements 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 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. Native title legislation also provides a framework for compensation to be paid for acts that affect native title rights and interests. Ordinarily, the relevant Commonwealth or State government is liable to pay compensation for acts attributable to it. However, under the Mining Act 1978 (WA) liability for compensation associated with native title can be passed back to the holder of a mining tenement at the time of a determination of native title compensation.
State and territory Aboriginal and non-Aboriginal heritage laws operate in parallel to the Native Title legislation. They exist predominantly for the purposes of managing the impact of developments on sites, objects and areas of heritage significance. Where an area of heritage significance is placed on the national or world heritage registers, federal approval processes may also apply. To date, there has not been any significant impact on any of AngloGold Ashanti’s tenure due to Native Title or 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 in Western Australia 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. In Western Australia, 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 tenements 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. Depending on the jurisdiction, a further separate approval may be required for the removal of native vegetation within the tenement.
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. The maximum initial term of a mining lease in Western Australia 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. 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 tenement is required to pay annual rent in respect of the tenement. 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 granted 21-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 current life-of-mine at AngloGold Ashanti’s operations in Australia. At Sunrise Dam the deposit is now situated upon two mining leases covering approximately 7,808 hectares and another mining lease of 1,768 hectares contains related infrastructure. Both leases are currently in good standing, with expiry dates in 2038. 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.
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.
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 for non-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 a 40-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 set at pit-head value on the mineral extracted, 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, a 30-year stability as to the tax burden on the project and the customs and foreign exchange regimes and 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 subjects on-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.
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 the so-called “zona núcleo”, 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. As the FMA has not yet been converted into law by the National Congress, its provisions are neither binding nor enforceable.
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 calculated at pit-head value of the mineral extracted thus bringing it to the cap of the Mining Investment Law.
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 Mining Agency (ANM) 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 of 1988). AngloGold Ashanti’s operations in Brazil consist of both claimstake mines and granted mines.
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 ANM are valid for one to three years. Extensions can be obtained if necessary, as long as it is justified. 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 ANM and (iii) refrain from suspending mining activities without prior notice to ANM.
During the exploration period, the mining titleholder has to pay an Annual Rate per Hectare (TAH - Taxa Annual por 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 which is one and one-half percent for gold is currently calculated based on revenues.
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 Resource carried out in those states. This tax could range from BRL3.00 to BRL6.50 per ton. In the states of Minas Gerais and Goias, however, gold ore was exempted from the collection of this new duty.
Potential regulatory changes
Changes to the mining legislation were submitted in 2013 and 2017 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 Reserve, 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.
Legally, the proposals would change the rules applied to mining titles access. While exploration authorisations would be effective for a longer period of four years, they would be renewable only once, as long as the company is able to justify the renewal to the authorities, who would make a discretionary decision as to whether to approve the request. Companies would also have to demonstrate that they are investing in exploration activities on a yearly basis. On the hypothesis that the access to the area is prevented by either landowners or the ability to obtain an environmental license through no fault of the company, the authority would extend the deadline as many times as necessary.
Exploitation rights would be limited to 35- or 40-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.
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).
As of the end of 2017, most of the changes in the legislation initially suggested were not approved, however, this legislation may be reintroduced in the same or similar form in the future.
Land ownership and mining rights
The Colombian Constitution declares that the sub-soil and the non-renewable natural resources located within the Colombian territory are the property of the Colombian State. The underlying principle of Colombian mining legislation for the granting of mining concession contracts is first come, first served. Mining activities are regulated by the Mining Code, Act 685, 2001.
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 no pre-existing claims, the government agency grants the applicant a “free area”.
The concession contract
The government agency grants exclusive concession contracts for exploration and exploitation. Such concessions allow concessionaires to conduct the studies, works and facilities 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 facilities. 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 suspended, for example, due to force majeure or extensions/modifications to the timelines. Force majeure was declared at the La Colosa project, stopping all activities, following the outcome of the plebiscite held on 26 March 2017 in the Colombian municipality of Cajamarca, which hosts the La Colosa exploration site. The grant of force majeure is for one year and will expire in June 2018, after which such declaration will need to be extended.
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 the non-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 on 28 February 2037.
In order to obtain an authorization from the National Environmental Licensing Authority of Colombia to carry out the Project, 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 contract. 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 facilities to be implemented 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:
|•||Protected forest reserves;|
|•||Paramos (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. In addition, Resolution 187/2016, passed by the federal government in late 2016, identifies areas that the Ministry of the Environment has determined to be “paramos” areas, or paramos 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 paramos-designated area. Certain areas designated as “paramos” are within the mining footprint currently envisioned for La Colosa. AGAC 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 paramos areas.
Cannon fees and royalties
Cannon fees are due from the moment the moment the concession contract is registered with the Mining Register. 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 and sub-products being exploited. For gold, gross monthly income is multiplied by 0.8, to which a four percent royalty is applied.
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.
United States of America
Mineral and surface rights in the United States are owned by private parties, state governments, or the federal government. The majority of land utilised for precious metals exploration, development and mining in the western United States is owned by the federal government, and often the state government will have an ownership interest in minerals, regardless of whether the state is the surface owner. The right to mine on such federal land in western states is governed by the General Mining Law of 1872, as amended (General Mining Law). The General Mining Law allows mining claims on certain federal lands upon the discovery of a valuable mineral deposit and proper compliance with claim location and maintenance requirements.
In Nevada, AGA (U.S.A) Exploration, Inc. is advancing a joint venture property on federal lands through an Earn-in Option Agreement for 277 mining claims, covering an area of approximately 5,700 acres. On these lands, AngloGold Ashanti (U.S.A.) Exploration, Inc. is currently engaged in early-stage exploration activities that include, but are not limited to, geological and spectral mapping, surface geochemical sampling, and RC and/or diamond drilling.
Mineral exploration activities in Nevada are also generally subject to applicable federal, state, and local permitting requirements, but the specific regulatory authorizations required for the company’s activities are based on the nature and location of the exploratory work. AngloGold Ashanti (U.S.A.) Exploration, Inc.’s Nevada operations are currently conducted under what is generally referred to under federal law as a notice-level operation subject to 43 Code of Federal Regulations Section 3809.21. The federal Bureau of Land Management (BLM) issued a Notice of Decision approving these exploration operations on 1 November 2017. The BLM determined that the operations would not cause unnecessary or undue degradation as defined under 43 Code of Federal Regulations Section 3809.5. An amendment to the project was approved by a BLM Notice of Decision dated 31 January 2018. The Notice of Decision requires reclamation of the drill pads and roads, including the reseeding of disturbed lands. The Notice of Decision also set the financial guarantee amount for reclamation. The Notice of Decision includes a two-year term from the date of 1 November 2017.
Nevada’s Bureau of Mining Regulation and Reclamation (BMRR) also regulates mining within the state. Exploration projects of five acres or less, the scope of a notice-level operation under federal law, are exempt from BMRR regulation. AngloGold Ashanti’s current exploration program falls within this exemption.
In Minnesota, AngloGold Ashanti Minnesota, Inc. is undertaking early-stage reconnaissance exploration activities to determine the potential for gold mineralization in the northern counties of Minnesota. Minnesota uses a leasing system for state-owned minerals. Under this system, qualified applicants can obtain a nonferrous metallic mineral lease for a 50-year term that grants the company the right to explore, mine, and develop minerals, subject to applicable environmental review and permitting requirements. AngloGold Ashanti Minnesota, Inc. holds a total of 271 state mineral leases administered by the Minnesota Department of Natural Resources. These state mineral leases encompass an area of approximately 106,000 acres. The company’s exploration activities on these lands include regional geophysical surveying, surface geological mapping, rock chip and glacial till sampling, and roto-sonic drilling.
Mineral exploration activities in Minnesota are generally subject to applicable federal, state, and local permitting requirements, but the specific regulatory authorizations required for a company’s activities are based on the nature of the exploratory work. Before conducting mineral exploration activities on state lands, a company must hold a state mineral lease and obtain approval from the Minnesota Department of Natural Resources of an exploration plan of operations. AngloGold Ashanti Minnesota, Inc. currently holds state mineral leases for the state lands on which it is conducting its operations and has obtained agency approval for its current exploration program. In addition, AngloGold Ashanti Minnesota, Inc. must maintain its registration as an exploratory borer and provide the requisite advance notice of any drilling activities to the Minnesota Department of Health. For its currently approved exploration program, AngloGold Ashanti Minnesota, Inc. has no present obligation to complete environmental review, obtain environmental permits, or submit any financial assurance or bonds. The company must comply with the terms of its leases and the conditions of its approved exploration plan of operations, including reclamation of its drill sites. Any potential future exploration programs may, depending on their scope, be subject to additional environmental review and permitting requirements, but these requirements are generally less extensive than those required for mineral development. In the event the company decides to proceed with mineral development within the state of Minnesota, it will need to complete an Environmental Impact Statement and obtain a variety of federal, state, and local permits, including a Minnesota permit to mine and environmental permits relating to water quality, air quality, wetlands, and other permits typically associated with mining projects.
Potential regulatory changes
Over the years, the U.S. Congress has considered a number of proposed amendments to the General Mining Law and other federal statutes. Among the significant features contained in previously proposed legislation were a production royalty obligation, new and more stringent environmental standards and conditions, additional reclamation requirements, extensive new procedural steps which would likely result in extended permitting timelines, and granting counties the ability to petition the Secretary of the Interior to make certain areas unavailable for the location of unpatented mining claims. The U.S. Environmental Protection Agency has also proposed potential revisions to financial assurance requirements relating to mineral development activities.
In Minnesota, the state legislature and various state agencies have also considered potential changes in statutes and regulations governing mineral exploration and development activities. These potential changes include revisions to relating to species, cultural resources, and water quality protection.
AGA is currently unaware of any new Federal or state legislative or regulatory changes or rule-making that has been proposed or enacted that would adversely affect its current exploration programs. If any of the above-referenced provisions were adopted in the future, the company’s operations in Nevada and Minnesota could be adversely affected.
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 well as applicable law and regulations 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 compliance 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 the clean-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 a pre-tax rate that reflects current market assessments of the time value of money.
Provisions for decommissioning and for restoration (excluding joint ventures) increased from $705 million in 2016 to $724 million in 2017. 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. At 31 December 2017, the environmental rehabilitation provision was $695 million. The balance of the rehabilitation provision of $29 million was included under “Non-current liabilities held for sale” in the statement of financial position.
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.
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, environmental clean-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 at the company’s properties which may have been caused by previous owners or operators.
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.
Mining and mineral processing operations generate waste rock and tailings.
During open-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 contain sub-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 applicable to mining operations generally and restricting other mine operators in response.
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 at this time 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 environmental impacts on those areas, for which AGA, as the current owner/operator, may be legally responsible.
In addition, AngloGold Ashanti identified a flooding and future pollution risk to deep groundwater in the Far West Rand goldfields in South Africa. AngloGold Ashanti’s operations are part of the Far West Rand goldfields. The premature closure of neighbouring mines owned by other mining companies in the area led to increased pumping obligations on AngloGold Ashanti to address water infiltration into AGA’s mines, including additional legal requirements associated with construction, litigation and permits, which increased costs for the group.
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 dewater 4 and 6 shafts and discharge the water. AGA continues to comply with the directive.
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.
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. The outcome of the climate change proposals 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 allowances or taxes including through costs passed on by electricity utilities which supply the company. AngloGold Ashanti also could incur significant costs associated 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 emissions or financial obligations pursuant to evolving climate change regulatory regimes.
For example, in South Africa, National Treasury issued the Second Draft Carbon Tax Bill on 14 December 2017. South Africa ratified the Paris Agreement in November 2016 and endorsed its nationally-determined contribution, which requires that greenhouse gas emissions peak in 2020 to 2025, plateau from 2025 to 2035 and decline from 2036 onwards. The implementation date of carbon tax will be determined by the Minister of Finance through an announcement in 2018, or at the Budget 2019, taking into account the state of the economy. The tax will be phased in with the first phase ending in 2022. The impact in the first phase is designed to be revenue-neutral in terms of its aggregated impact, given the complementary tax energy incentives and reduction or credit for the current electricity levy.
During June 2016, National Treasury published for public comment, proposed Regulations on carbon offsets which can be used to reduce the potential carbon tax liability. The Regulations allow an “offset” in respect of any “certified emission reduction” derived from an “approved project” (including an existing project) carried on after 1 January 2017 in South Africa that is not subject to the carbon tax. The rate is expected to be ZAR120/ton of carbon dioxide, increasing by cpi plus two percent up to 2022 and in line with inflation thereafter. A system of rebates is expected to have the effect that the actual rate will be between ZAR6/ton and ZAR48/ton.
The direct impact of such a tax on the Group is not estimated to be material.
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 has applied 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, create resource shortages, 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
Safety is a significant sustainable development challenge facing AngloGold Ashanti. 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 can, individually and/or in aggregate, have a material impact on operations. During 2016 safety related stoppages commonly resulted in full mine stoppages, whereas in 2017 this largely changed to localised area or section stoppages.
AngloGold Ashanti is also enhancing safety programmes, and a revised Group Safety strategy have been introduced. Three-year work plans were developed for each strategic focus area, comprising objectives, activities, performance metrics, targets and accountabilities. The updated strategy was approved by the company executive and implementation workshops were held with South Africa and International Operations leadership teams. In South Africa in particular the work culminated in a revised “Safe Production Strategy” which forms the basis in improving our capability to respond to risk, our focus remained on embedding and integrating safety into the business.
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). OLD includes 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 control measures to prevent hazardous exposures, and providing employees with Personal Protective Equipment. It is believed that the costs associated with activities to prevent disease would be substantially lower than those associated with managing the consequences of occupational disease. 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 of non-miners who have OLD. Work on amending ODMWA 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 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. Over the past 10 years, the incidence of new infections has declined.
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.
ANGLOGOLD ASHANTI GLOBAL OPERATIONS: 2017
Operations and projects
|AMERICAS||CONTINENTAL AFRICA||SOUTH AFRICA|
|Cerro Vanguardia (92.5%)||Siguiri (85%)||Vaal River|
|AGA Mineração||Sadiola (41%)||West Wits|
Percentages indicate the ownership interest in AngloGold Ashanti, whether held directly or indirectly. All operations are 100%-owned unless otherwise indicated.
|Both Morila and Kibali are managed and operated by Randgold Resources Limited.|
|Surface Operations includes First Uranium SA, which owns Mine Waste Solutions (MWS). MWS is managed and operated as a separate cash-generating unit.|
|Obuasi remained on care and maintenance in 2017. Prefeasibility study completed.|
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 operations and three projects in ten countries, comprises long-life, relatively low cost assets with differing ore body types located in key gold-producing regions.
Our operations and projects 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, Brazil and Colombia)|
These operating assets are supported by greenfield projects and a focused exploration programme.
In 2017, Obuasi remained on care and maintenance and the closure process at Yatela continued. On 19 October 2017, AngloGold Ashanti announced the sale of various assets in the Vaal River region of South Africa including the Moab Khotsong and Kopanang mines. Subsequent to year end all conditions precedent were fulfilled and the effective date of sale was 28 February 2018.
AngloGold Ashanti’s operations and joint ventures employed, on average, 51,480 people (including contractors) in 2017 (2016: 52,649).
In 2017, AngloGold Ashanti produced attributable 3.8 million ounces of gold (2016: 3.6 million ounces) as well as 753,000 pounds of uranium oxide, 6.2 million ounces of silver and 203 tonnes of sulphuric acid as by-products.
Production of 3.8 Moz was achieved at a cost of sales of $3.6 billion and an all-in sustaining cost of $ 1,050/oz for subsidiaries and $1,087/oz for equity accounted joint venture operations respectively, compared to 3.6Moz in 2016 at a cost of sales of $3.3 billion and all-in sustaining cost of $990/oz for subsidiaries and $955/oz for equity accounted joint venture operations, respectively.
The attributable Ore Reserve decreased from 50.0Moz in December 2016 to 49.6Moz in December 2017. This gross annual decrease of 0.4Moz includes depletion of 4.3Moz. The balance of 3.9Moz additions in Ore Reserve, results from exploration and modelling changes of 4.0Moz and other factors of 0.7Moz, whilst changes in economic assumptions resulted in a 0.8Moz reduction.
Capital expenditure, including equity accounted joint ventures, in 2017 amounted to $953 million (2016: $811 million).
Regrettably, there were seven fatalities across the group’s operations in 2017. The all injury frequency rate was 7.49 per million hours worked compared to 7.71 in 2016.
In 2017, AngloGold Ashanti’s South African operations comprised four deep-level mines and surface production facilities. They are:
|•||The Vaal River operations - Kopanang and Moab Khotsong;|
|•||The West Wits operations - Mponeng and TauTona; and|
The South Africa region has undergone extensive restructuring to ensure its long term sustainability. Moab and Kopanang operations have been sold subsequent to year end and TauTona was placed on orderly closure during the year. Following the completion of the sale of various assets in the restructure of the group’s South Africa region, as of 1 March 2018, AngloGold Ashanti ceased to have underground operations in the Vaal River area.
Average number of
1. Vaal River
2. West Wits
3. Surface operations (1)
|Includes MWS for purposes of this report. It is operated and managed as a separate cash-generating unit.|
South Africa Key Statistics
Pay limit (1)
Recovered grade (1)
Gold production (2)
|Cost of sales||$m||1,114||1,041||1,083|
Total cash costs (3)
All-in sustaining costs (3)(4)
|Number of fatalities||7||6||9|
|AIFR||Per million hours worked||12.68||12.02||10.81|
|Average no of employees: Total||26,245||28,507||28,325|
|Refers to underground operations only.|
|Includes production ounces from the technology development programme.|
|Total cash costs and all-in sustaining costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A: Operating Results”.|
|Excludes stockpile impairments.|
Performance in the South Africa Region in 2017
In June 2017, the company took a decision to restructure the South African assets, to focus on returning the South African business to profitability, while mitigating job losses. It was decided in the latter half of the year, to place TauTona into orderly closure. In addition, the decision was made to sell Kopanang, the nearby West Gold Plant and related infrastructure as well as to dispose of Moab Khotsong mine and related infrastructure. These transactions were subject to a number of conditions precedent, all of which were achieved and the sales transactions were concluded effective 28 February 2018. As of 1 March 2018, AngloGold Ashanti ceased to have underground mining operations in the Vaal River area.
Production and costs
The South African operations produced 903,000oz, a seven percent decrease year-on-year as tonnes mined were affected by a poor start up to the year at all operations. Underground yield dropped eight percent to 6.93g/t, a result of lower feed grades as well as higher dilution year-on-year. This was mainly due to an increase in waste tonnes at Moab Khotsong, moving away from higher grade areas at Mponeng, and the reclamation of the tailing storage facilities at the West Wits Surface Sources.
The decision to stop the loss-making operations in the third quarter further impacted full-year production.
At West Wits, production was lower than in the previous year at 315,000oz, mainly due to the slow start-up to the year following safety-related stoppages late the previous year. Production at Mponeng decreased year-on-year, mainly as a result of the planned mining of lower-grade areas, face-time constraints with mining occurring further away from shaft stations, as well as three separate seismicity-induced fatal accidents in the second half of the year. The mine’s performance improved towards the end of the second quarter through to the third quarter, due to improved efficiencies. Production highlights included a four percent increase in the mineable face length which allowed for more face-length flexibility. During the year, the average monthly face advance increased from less than 4.9m to more than 5.0m in June, which was maintained for the rest of the year. Mponeng’s yield improved in the last quarter of the year, to an average of 8.54g/t. Unfortunately, safety-related work stoppages following the fatal accidents in late October and early November contributed to a disappointing decline in production in the last quarter.
At TauTona, severe production challenges, in addition to depleted Ore Reserves and limited mining flexibility, compounded operational inefficiencies and low productivity, and led to the decision to place the mine into orderly closure.
At the Vaal River operations, production improved by four percent year-on-year to 385,000oz. The main contribution was from Moab Khotsong where efficiencies improved and there were fewer safety-related disruptions, despite dilution and a lower mine call factor.
At Kopanang, production remained flat year-on-year, impacted by safety-related interruptions following the fall-off-ground fatal incidents in the fourth quarter. However, volumes mined improved and implementation of the cycle mining strategy showed early signs of success.
Surface Operations’ production was up three percent at 192,000oz for the year. At Mine Waste Solutions, production was 18 percent higher at 109,000oz compared with the same period in 2016, given the improvement in feed grades from the Sulphur Paydam and East tailing storage facilities (TSF), coupled with improved recovery. The yield increase was as expected as the Sulphur Paydam is normally associated with higher reef values. Production was also boosted by higher volumes of floor cleaning material reclaimed. Gold recovery efforts improved in the last quarter of the year to around seven percent, aided by reagent suite optimisation and improved carbon management. Operations at the flotation and uranium circuit remain suspended as investigations into improved water reticulation continue.
Production from hard rock dumps was lower owing to a drop in tonnage throughput, and lower recoveries due to the increased amount of clean-up material which is refractory in nature. The sticky nature of the material processed through the Surface Operations’ plants negatively impacted metallurgical efficiencies. Surface Operations’ production was also affected by the suspension of the Kopanang marginal ore dumps and reduced availability of the mill at the Kopanang gold plant.
All-in sustaining costs were 15 percent higher than 2016. Total cash costs for the region increased to $1,085/oz compared with 2016, due to lower production volumes, inflationary pressures and a 10 percent stronger rand on average against the US dollar.
Total capital expenditure for the region decreased 18 percent year-on-year as a result of cost curtailments in line with the suspension of operations and restructuring of the South Africa asset base, and the delay in starting the Mponeng Phase 2 life of mine extension project.
Regrettably, seven fatalities occurred in the South Africa region in 2017. Two fatalities occurred following fall-of-ground related incidents at Kopanang and one fatality at Moab in a tramming incident. Four seismicity-related fall-of-ground incidents occurred at Mponeng.
As at 31 December 2017, the total Ore Reserve for the South African region was 23.5Moz (2016: 25.1Moz). This is equal to 47 percent of the Group’s Ore Reserve. AngloGold Ashanti announced on 19 October 2017 that it was selling various assets in the Vaal River region of its South African operations. As at 31 December 2017, the sales processes were still underway and therefore do not affect the stated Ore Reserve for 2017. However, with the conclusion of the sales at the end of February 2018, the following reductions in the Ore Reserve will take place:
Kopanang: Ore Reserve 0.36Moz, Moab Khotsong: Ore Reserve 4.87Moz, Surface Operations: Ore Reserve 0.87Moz.
Growth and improvement
Mponeng Phases 1 and 2 Project
Mponeng’s mine life extension is initially being executed through the Below 120 Level, Phase 1 project. Phase 1 aims to access deeper, higher-grade ore with the development of a decline access below the current secondary shaft. Phase 2, the next stage of the mine life extension, currently under evaluation, involves deepening the secondary shaft to further extend the life of mine.
Completion and full commissioning of Phase 1 is expected in the second quarter of 2018. An additional ventilation hole is being created from decline 3 to 116 level to create more ventilation capacity, along with an ore pass down to 126 level to ease ore handling logistics on 123 level. Completion of the water management infrastructure on 127 level was delayed during the last quarter of the year following flooding of the emergency pump station and pump station panels. The emergency pump station is still under construction at the bottom of the decline system, with full commissioning expected in the second half of 2018. Construction and commissioning of the ore handling infrastructure to 126 level is expected to be completed by the end of the first half of 2018. The ramp-up to steady state of ore reserve development is continuing. The revised geological resource model associated with the Ventersdorp Contact Reef is currently under review.
The Phase 2 feasibility study for the Mponeng life of mine project has resumed, having been interrupted at the end of May 2017 to allow the geotechnical study to be completed to determine the most appropriate location of the infrastructure relative to tolerable levels of rock stress. The feasibility study is now expected to be completed during 2018.
AngloGold Ashanti has seven mines in the region, six of which are currently in operation. AngloGold Ashanti manages four of the six operations. Obuasi is on care and maintenance and was not operational during 2017. Closure is underway at Yatela.
Attributable gold production
Average number of
|Joint venture operations|
1. Democratic Republic of the Congo
Continental Africa - Key Statistics
|Gold production (attributable)||000oz||1,094||955||1,028|
|Cost of sales||$m||1,070||925||969|
Total cash costs (1)
All-in sustaining costs (1)(2)
|Number of fatalities||0||0||1|
|AIFR||Per million hours worked||0.48||0.31||0.29|
|Average no of employees: Total||10,268||9,599||8,907|
|Total cash costs and all-in sustaining costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A: Operating Results”.|
|Excludes stockpile impairments.|
|Joint venture operations|
|Gold production (attributable)||000oz||359||356||407|
|Cost of sales||$m||440||406||378|
Total cash costs (1)
All-in sustaining costs (1)(2)
|Number of fatalities||0||0||0|
|AIFR||Per million hours worked||2.08||1.95||3.64|
|Average no of employees: Total||3,325||3,092||3,040|
Production and costs
The Continental Africa region delivered a 10 percent increase in production compared to the previous year. Exceptional production performances recorded at Siguiri, Iduapriem and Geita were offset by lower output from Sadiola as the remaining oxide ore mining sources are depleted.
Geita’s production increased by 10 percent compared to 2016, driven by a 10 percent increase in recovered grade, a result of the higher-grade ore mined at Nyankanga Cut 7 and Cut 8. Underground ore sources were in line with the mine plan while maiden underground operations were ramping up toward commercial volumes. Plant throughput achieved was above plan owing to the increase in the oxide feed and finer fragmentation resulting from the increased running time of the secondary and tertiary crusher circuits. The transition to underground operations continued with four areas being mined during the year, resulting in a 248 percent increase year-on-year to 493,000t in underground volumes treated.
Production at Siguiri increased by 25 percent year-on-year, following a solid performance with improved productivities and greater access to higher grade ore in the new Seguelen pit in Area 1. Production in 2017, the third highest in the mine’s history, was boosted by favourable grade variances and optimised treatment of full-grade ore laterite cap rock (duricrust) stockpiles. This improvement offset treatment of lower-grade stockpiles from other pits and the lower volumes treated. During the year, work began on the Siguiri combination plant project, with commissioning planned for late 2018.
At Iduapriem, production increased by seven percent year-on-year. Mining during the year focused on deeper, higher-grade areas, resulting in an eight percent increase in recovered grade. This was partly offset by a marginal drop in tonnes treated. Total tonnes mined increased 27 percent year-on-year, owing to greater mining-fleet productivity as the mine continued with its extensive waste stripping programme to access the ore sources in the Block 7 and 8 pit that will provide the foundation for sustainable production over the future life-of-mine.
At Kibali, tonnage throughput increased by four percent in 2017 to record levels. Gold production at 268,000oz in 2017 reflected the improved performance in the second half of the year. This was boosted by an increase in both open-pit and underground ore tonnes mined following the successful commissioning of the underground materials handling system and optimal use of the shaft, facilitating the increase in higher grade ore from underground. Improved plant availability and recovery rates also contributed to increased throughput and were boosted by additional ultra-fine grind and Pumpcell capacity. Using the Pumpcell amongst other things helped facilitate the treatment of 100 percent sulphide ore at the processing plant where it was processed solely for extended periods, achieving design recovery and above-design throughput. This resulted in higher volumes of ore being treated and a two percent increase in production. In the underground mine, operational challenges compounded by underutilisation of the ore pass system, continued during the year and resulted in the treatment of lower grade ore at the expense of the high-grade underground ore.
At Sadiola, production declined as the recovered grade decreased. This was a result of reduced mining flexibility as the remaining oxide ore mining sources being depleted. Plant operations were efficient and consistently achieved planned throughput. This helped to partly offset the lower feed grade and provided flexibility to maintain a steady production and revenue profile.
Morila resumed mining in the latter part of the year, accessing and treating higher grade ore from the Domba pit, contributing to a year-on-year increase in production. The increased tonnage throughput during the year was further boosted by consistent plant availability and treatment of softer ore, offsetting the decrease in recovered grade. The mine is expected to continue treatment of mineralised waste ore, augmented by higher grade ore from targeted mining areas, after which the mine will transition to full closure.
All-in sustaining costs for the subsidiary and joint venture operations in the region increased to $907/oz and $1,088 respectively mainly a result of increased sustaining capital expenditure that was partly offset by higher production. Total cash costs increased marginally year-on-year at Geita due to the negative impact of higher initial costs from underground mining and increased at Kibali due to increased operating costs. These increases were partially offset by higher production and recovered grades. Total cash costs at Siguiri and Iduapriem decreased year-on-year. At Siguiri, costs decreased by eight percent as a result of increased production. At Iduapriem, total cash costs decreased by nine percent because of higher production and lower costs due to operational efficiencies, cost management initiatives and higher recovered grades.
Capital expenditure for the region increased in line with company plans as we invested in growth projects at Siguiri and Kibali, and increased sustaining capital investment at Geita and Iduapriem. These projects are expected to realise future benefits as higher grade ore is accessed at Iduapriem and Ore Reserve development work in the underground operation at Geita continues to ramp up. The balance of sustaining capital expenditure was earmarked to improve asset reliability and consistent operations across the Continental Africa region.
All-in sustaining costs for Kibali increased year-on-year, a result of increased sustaining capital expenditure on waste stripping in the Pakaka and Kombokolo pits and increased underground capital expenditure.
The region reported a 24 percent year-on-year all injury rate frequency rate improvement compared to 2016. There were no fatalities during the year, and the region achieved a record 801 fatality-free days since the last fatality in October 2015.
The total attributable Continental Africa Region Ore Reserve was 16.9 million ounces (2016: 17.8 million ounces). This amounts to 34 percent of the group’s Ore Reserve.
Growth and improvement
Geita made good progress with the construction of the new 40MW power plant, which is expected to be commissioned in the first half of 2018. The plant will provide the required levels of reliable power to the mine and reduce the overall cost of power. The mine successfully transitioned to and expanded underground mining at Star & Comet while developing two new underground mines in the Nyankanga mining area. Open-pit mining is anticipated to continue at Nyankanga Cut 8 until the second half of 2019 while Geita Hill East Cut 1 is expected to finish in the second half of 2018. Exploration work is being conducted at Selous, 2.4km from Star & Comet, for a satellite pit to supplement underground operations.
Siguiri’s combination plant is well advanced and scheduled to be fully commissioned in the third quarter of 2018. The associated 30MW power plant will be commissioned in the second half of 2018. Construction of the combination plant began with the early works in the first half of the year carried out by a local contractor. The main civil construction commenced in the second half of the year with the first major concrete poured in December 2017. The mill shells arrived on site in September, and off-site fabrication and sourcing of electrical and instrumentation equipment and cabling, continued during the last quarter of the year. Major contractors have mobilised on site and a new mining contractor is scheduled to begin mining in the first half of 2018.
At Iduapriem, the deferred stripping carried out during the year at Teberebie Cut 3 was completed and waste stripping at the larger Cut 1 exceeded planned targets. The project delivered an additional 4.1Mt of marginal and waste material as a result of improved efficiencies in mining unit rates. This work will now provide access to the ore body to extend the mine life by about a decade. The plant recovery project was successfully completed and is expected to contribute to higher plant recoveries in 2018.
The main pit dewatering project at Sadiola was substantially completed at year end, with all equipment and materials delivered to site. Construction of the sulphide project awaits approval by the Government of Mali, though no agreement has yet been reached in this regard. Despite our efforts and the clear benefits the project would generate locally and to the Government of Mali, there has been no resolution around the terms critical to moving the project forward. AngloGold Ashanti and joint-venture partner IAMGOLD Corporation continue to evaluate the project which will add sulphide-ore processing capability to the plant. Although we remain committed to the project, if no agreement is reached, the operation will enter a restricted exploitation phase and then, when stockpiles are exhausted, it will enter a phase of suspended exploitation (care and maintenance).
At Kibali, capital expenditure of $110m for the year (attributable), was spent mostly on underground development, the vertical shaft and the second hydro-power plant. Underground paving at the central haulage level was completed, allowing haulage from the ore passes into the underground crushers. The materials handling system was also commissioned during the last quarter of the year, and 118kt of ore hoisted from the shaft, with total underground ore tonnes of 1,110kt mined for the year. Underground ore production from the declines totalled 505,000t in the last quarter of the year. Once the ramp up has been completed, a significant increase in production is expected. Ambarau, the second hydro power station was completed and commissioned during the first half of the year, taking Kibali’s total hydro generation capacity to 32MW. At the plant, the ultra-fine grind and Pumpcell capacity was increased at the start of the year, enabling the processing of substantially increased floatation concentrate volumes, improving grind and recovery as well as providing flexibility in ore treatment. Furthermore, waste stripping at both Kombokolo and Pakaka satellite pits was undertaken during the course of the year. The only major capital project remaining is the third hydropower station at Azambi, which is being constructed and is expected to be commissioned in the second half of 2018.
Update on Obuasi redevelopment
Obuasi, which was placed on care and maintenance in 2016, remained so throughout 2017. The cost of Obuasi’s care and maintenance programme was $62m in 2017 (2016: $70m).
The invasion of a part of the mine by illegal miners in 2016, has been resolved and the mine’s operational area has been cleared of illegal miners. Public security agencies provided security at the mine throughout 2017, and continue to do so.
AngloGold Ashanti was in discussions with the Government of Ghana throughout 2017 to secure the necessary agreements and permits for the possible redevelopment of the mine. The boards of AngloGold Ashanti (and its relevant subsidiaries) have approved the redevelopment of Obuasi, subject to ratification by Ghana’s parliament of the relevant fiscal, development and security agreements. These agreements have been signed by the Government of Ghana. The board therefore approved interim funding of $31m to cover the first six months to enable the project team to be established and to set-up the front-end engineering and design, so as not to delay the project.
The study into Obuasi’s redevelopment was completed with improvements in returns and payback period. This was achieved with an improved geological model, phased capital expenditure and the supportive agreements signed with the Government of Ghana.
The redevelopment will establish Obuasi as a long-life, modern, mechanised underground mining operation. This is a fundamental departure from the mine’s previous operating model. The redevelopment will deliver a mine that makes use of automation and controls for improved operational efficiencies and consistency in performance. It envisages a smaller, but more skilled workforce that can operate in the planned mechanized and automated environment.
The detailed feasibility study covers every aspect of the mine, including operating methods, systems and processes, environmental management and mine rehabilitation, organisational design, human resource strategy and social responsibility, among others.
Attributable gold production
Average number of
|1. Sunrise Dam||238||489|
|2. Tropicana 70%||322||485|
AngloGold Ashanti’s Australasian assets comprise the wholly owned Sunrise Dam and the 70 percent-owned Tropicana Gold mine, Australia’s newest gold mine.
Australasia - Key Statistics
|Gold production (attributable)||000oz||559||520||560|
|Cost of sales||$m||550||540||525|
Total cash costs (1)
All-in sustaining costs (1)(2)
|Number of fatalities||0||0||0|
|AIFR||Per million hours worked||8.53||9.49||8.56|
|Average no of employees: Total||974||925||836|
|Total cash costs and all-in sustaining costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A – Operating Results”.|
|Excludes stockpile impairments.|
Production and costs
The region delivered a strong performance in 2017, producing 559,000oz driven by higher mill throughput rates and feed grades and increased metallurgical recoveries.
Sunrise Dam celebrated its 20th anniversary in March 2017. A strategy to lift the mined grade while maintaining the underground ore production rate at 3.0 Mtpa was successfully implemented during the year, resulting in a five percent lift in yield to 1.83g/t. The mine’s production increased by four percent, compared with 2016. Underground ore is the primary source of mill feed and is blended with intermediate grade (1.26 g/t) stockpiled ore that was accumulated during open-pit mining to meet the processing plant capacity of approximately 3.6Mtpa. The higher-grade Cosmo and Vogue ore bodies were the focus of development in 2017, with Vogue targeted to be the key ore source in 2018.
At Tropicana, optimisation and expansion of the processing plant lifted processing capacity to 7.7 Mtpa (100 percent), resulting in a 10 percent increase in mill throughput, which delivered a 10 percent increase in attributable gold production. A fines pulping circuit was commissioned in November 2017, further improving efficiency by minimising downtime during maintenance shutdowns. This is expected to increase annual mill runtimes by approximately two percent to more than 98 percent.
Following the introduction of a 600t face shovel to the mining fleet, mining rates increased to more than 90Mtpa in 2017, enabling the resumption of grade streaming - the preferential treatment of higher grade ore while low-to-medium grade ore was stockpiled - during the second half of the year. Mining in 2017 focused on the Havana 3 and Tropicana 2 pits.
The all-in sustaining cost for the Australasia region decreased marginally (one percent) to $1,062/oz, due to planned increases in production at both Sunrise Dam and Tropicana, and decreased mining unit costs at Tropicana due to mining rates exceeding 90Mt. These favourable factors were partially offset by a stronger Australian dollar against the US dollar, and increased capital expenditure at Sunrise Dam. This included $20 million for the Recovery Enhancement Project (REP).
Capital expenditure at Tropicana related to Long Island will be primarily for the expansion of the accommodation camp, heavy vehicle workshop infrastructure and for a second ball mill. The installation of a second ball mill in the Tropicana processing plant grinding circuit was approved in 2017 with commissioning scheduled for the fourth quarter of 2018.
At Sunrise Dam, an EPC (engineering, procurement and construction) contract was awarded to GR Engineering Services to undertake the design and construction of a brownfields upgrade to processing facilities as part of the REP. The project also requires additional power generation capacity. To this end, it is planned that two 4MW gas generator sets will be added to the existing power station to increase capacity to 43MW.
Work commenced in 2017 on an expansion to the tailings storage facility at Sunrise Dam, which will add approximately eight years to the life of the facility. This work is expected to be completed by the fourth quarter of 2018.
The region’s safety performance remains strong. Again there were no fatalities during the year, while the AIFR was 8.53 per million hours worked an improvement of 10 percent compared to 2016.
At the end of 2017, the total attributable Ore Reserve for the Australasia Region was 4.0 million ounces (2016: 4.0 million ounces). This is approximately eight percent of the group’s total Ore Reserve.
Growth and improvement
At Tropicana, the focus for 2018 and beyond will be on implementation of the Long Island strategy, which is expected to extend the life of mine.
In December 2017, the Tropicana joint venture partners announced a commitment to the Long Island mining strategy and approval for an additional ball mill in the processing plant, to further lift plant throughput to 8.1Mtpa, which is expected to increase gold recovery.
The Long Island strategy has been driven by finding a more cost-efficient way to mine waste in pit cutbacks. It involves using a strip-mining approach that minimises waste haulage distances by using in-pit backfill, essentially optimising haulage distances over the life of mine. The approach comprises eight stages with three major decision points providing flexibility to tailor the approach at each decision point, depending on market and other prevailing conditions.
Phase one comprises mining of the Havana South pit and a cutback of the Boston Shaker pit, using the completed Tropicana pit as the first backfill location.
The Long Island development is expected to increase mining rates to between 95Mtpa and 107Mtpa over the next two years, to peak in 2019 and to continue at that rate for about four years. The project was enhanced by the decision to install a 6MW ball mill in the processing plant, enabling throughput to be lifted to 8.1Mtpa to match the increased mining rate. Through a reduction in grind size, baseline metallurgical gold recovery is expected to improve by up to three percent to approximately 92 percent.
This does not include potential underground production from mineralisation at the Boston Shaker ore body, which remains open at depth. A prefeasibility study incorporating infill drilling and underground mining options will be undertaken in 2018. The target is to delineate underground Ore Reserve at more than 3g/t to replace stockpiled mill feed after 2021.
The Long Island strategy was underpinned by an increase in the Ore Reserve at 66.59Mt, grading 1.91g/t gold, for a total of 4.08Moz. Including gold produced to date, Tropicana has delivered a 72 percent increase in Ore Reserve since the project was approved in November 2010.
In 2018, Sunrise Dam will continue to focus on embedding a more selective mining approach to target higher grade sections in the underground stopes, while maintaining the underground production rate at approximately 250,000t a month. This approach is designed to lift the grade of ore delivered to the mill and reduce cash operating costs. In line with this plan, work is focused on improving the productivity of the underground operation to lift sustainable ore production rates above 3Mtpa. Several capital projects, including ventilation upgrades and installation of an underground workshop, are aimed at improving the effective use of mining equipment and the reliability of the mine.
The Vogue ore body will be the key ore source in 2018 and remains open along strike and at depth. Two diamond drill rigs will continue to focus on drilling the Indicated and Inferred Mineral Resource at Vogue.
The performance of the 4Mtpa processing plant also set the standard globally within AngloGold Ashanti, ranking at number one for overall equipment efficiency, with the potential for further, incremental improvements expected in 2018.
The recovery enhancement project at Sunrise Dam is scheduled for commissioning in the second half of 2018 and is expected to lift the recovery rate, through the installation of flotation and ultrafine grinding circuits.
Work will continue in 2018 on the underground mine management system (UMMS), which will enable real-time analysis of the mobile fleet and services such as ventilation, power and dewatering. Over the longer term, overall equipment efficiency will be analysed to identify specific Operational Excellence projects that improve the effective time, mining rate and quality performance metrics of the mining equipment. The UMMS will be a critical tool to enable an improved production rate at the underground mine.
Encouraging results were reported during the year from drilling on the Butcher Well/Lake Carey exploration joint venture tenements where there is potential for the discovery of additional Ore Reserve for processing at Sunrise Dam, possibly replacing low-grade stockpiles currently being processed. Around 20,000m of diamond drilling was undertaken during 2017 within the Butcher Well/ Lake Carey exploration joint venture, along with aircore drilling to the north and metallurgical testing. A 30-person camp was established, together with a core processing facility.
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
Average number of
|Cerro Vanguardia 92.5%||283||2,001|
3. Colombia – exploration programme
Americas - Key Statistics (1)
|Gold production (Attributable)||000oz||840||820||831|
|Cost of sales||$m||851||752||719|
Total cash costs (2)
All-in sustaining costs (2)(3)
Capital expenditure (4)
|Number of fatalities||0||1||1|
|AIFR||Per million hours worked||3.29||3.96||5.61|
|Average no of employees: Total||8,511||8,126||7,679|
|Key statistics are for the continuing operations in the region and exclude CC&V which was sold effective 3 August 2015.|
|Total cash costs and all-in sustaining costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A: Operating Results”.|
|Excludes stockpile impairments.|
|100 percent, (not attributable) and includes Colombia.|
Production and costs
Production from the Americas region increased by two percent to 840,000oz in 2017, reflecting higher output from the Brazilian and Argentinian operations driven by operational improvements and an increase in tonnes treated.
In Brazil, at AGA Mineração, production increased four percent year-on-year, boosted by Córrego do Sítio’s strong performance, a result of improved geological modelling that assisted the recovery from the geotechnical challenges faced at the start of the year at the Córrego do Sitio complex. After a challenging start to 2017, various initiatives were implemented at the Cuiabá complex to improve future performance. These initiatives included the appointment of a new management team and adoption of an integrated planning system. The operation saw a seven percent increase year-on-year in ore treated, an improvement which we believe to be sustainable. The challenges at Cuiabá were due to delays in development of infrastructure that hindered access to high-grade areas.
At Serra Grande, the production increase came despite lower feed grades and was driven by higher tonnes treated, supported by improved crushing and milling efficiencies and more efficient leaching, following implementation of the carbon-in-leach project. These efficiencies were a result of Operational Excellence initiatives which led to improved levels of ore mined, offsetting lower open-pit production.
In Argentina, at Cerro Vanguardia, production increased to 283,000oz compared to the previous year, the highest level of production in 18 years. This achievement was driven mainly by the increase in tonnes treated at the plant together with operational and metallurgical improvements. In addition, the grades were higher year-on-year, a result of variability in the mining model.
Despite the continued focus on cost management and production improvements, total cash costs for the Americas region were higher in 2017, due mainly to inflationary pressures, particularly salary adjustments, and also the stronger Brazilian real compared with the previous year. In Brazil, costs were impacted by the lower grade feed, inflation and the nine percent appreciation in the local currency versus the US dollar. However, the cash cost increase in the region was partially offset by the seven percent drop in total cash costs at Cerro Vanguardia, mainly due to record production, higher by-product contribution and favourable stockpile movements.
At Cerro Vanguardia, various cost savings initiatives focused on improved efficiencies and production from the underground mine expansion, increasing mill throughput and silver recovery, and capital savings, among others. These cost saving initiatives are expected to continue to offset the combination of higher mining costs and currency impacts. Costs were also assisted by improved fleet availability and cost management initiatives implemented during the year that resulted in price reductions being negotiated for key consumables such as fuel, ammonium nitrate, cyanide and crushing media. These positive factors were offset by inflationary
pressures, particularly salary increases in Argentina that were agreed in October, as well as the elimination of the Patagonia ports rebates at the end of 2016, ending a 10 percent reimbursement from which Cerro Vanguardia had benefitted previously.
Regional capital expenditure increased by four percent, mainly a result of the high level of sustaining capital investment in Brazil, owing to inflation and the stronger local currency. Most of the capital expenditure in Brazil was on Ore Reserve Development to improve mine flexibility and access to ore stopes. At Cerro Vanguardia, capital expenditure was lower compared to 2016, owing mainly to a depreciating Argentinian peso against the US dollar. A more aggressive capital management approach was implemented across the region with all discretionary capital items being under strict review.
No fatalities were recorded during 2017. The AIFR improved by 17 percent compared to 2016.
At the end of 2017, the total attributable Ore Reserve for the Americas Region, was 5.2 million ounces (2016: 3.1 million ounces). This is approximately ten percent of the group’s total Ore Reserve.
Growth and improvement
Application of the Operational Excellence principles to exploration, Ore Reserve development, mining and metallurgy is expected to yield improvements in productivity, with the region benefitting from ongoing asset optimisation work.
At AGA Mineração’s Cuiabá complex, a fourth working shift is to be introduced during 2018, which will assist in driving productivity gains. Plans are also underway to increase the annual tonnage of ore treated and to expand mill/plant throughput to 1.9Mt, followed by a further ramp-up towards 2.1Mtpa. An increased Ore Reserve conversion programme is expected to improve the mine plan’s reliability.
At Córrego do Sítio, work is underway to further improve development productivity levels. Conversion rates of Mineral Resource to Ore Reserve are increasing and work is underway to improve recovery rates. Drilling campaigns continue to confirm the Ore Reserve that will extend the life of mine, including work on a new open-pit (Córrego do Sítio III) and the new underground mines at Mina II and São Bento Deep.
At Serra Grande, the Ingá ore body began production during the year, while the potential of the ore bodies at Mangaba and Corpo IV remain under evaluation. The mine delivered an eight percent increase in ore treated year-on-year, a result of the plant’s CIL leaching conversion and continuous efficiency improvement initiatives. The Palmeiras South negotiations, aimed at reaching agreement on possible accelerated exploration to confirm the area’s potential, are at an advanced stage.
At Cerro Vanguardia, the mine plan was executed on schedule, following the initiative launched in 2015 to accelerate open-pit and underground operations to optimise economic performance over the remaining life of mine, and to potentially increase production. New projects and alternatives to extend life of mine will be assessed during 2018.
In Colombia, the greenfields exploration programmes were realigned and focused on minimising cost while maintaining future optionality. Force majeure was declared at the La Colosa project, stopping all activities, following the outcome of the plebiscite held on 26 March 2017 in the Colombian municipality of Cajamarca, which hosts the La Colosa exploration site. The grant of force majeure is for one year and will expire in June 2018, after which such declaration will need to be extended. At Quebradona, following completion of a conceptual study in 2016, the focus in 2017 as the first phase progressed was on evaluating the alternatives to be considered during the prefeasibility phase, which is expected to be concluded in 2018. The alternatives included mining methods, mine access and project layout.
The Gramalote project, a joint venture between AngloGold Ashanti (51 percent and manager) and B2Gold (49 percent), declared its maiden Ore Reserve of 63.7Mt @ 0.86 g/t gold, at an attributable contained metal content of 1.8Moz. Gramalote represents a long-term option for AngloGold Ashanti, and all avenues to realise value from this important asset remain open. Work will continue to optimise all aspects of the project during its feasibility phase, which is currently under way. The enhanced prefeasibility study was completed in September 2017. AngloGold Ashanti is currently in discussions with its joint venture partner, B2Gold on how to further progress the project.
The project lies on the eastern flank of the Cordillera Central, near the towns of Providencia and San Jose del Nus in the municipality of San Roque, in the northwest of the Antioquia Department. It is approximately 230km north-west of Bogota and 124km north-east of Medellin.
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 Resource 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. The brownfields exploration programme is based on innovative geological modelling and mine planning and continual optimisation of our asset portfolio.
Our greenfields holdings/tenements consist of over 9,000km2 of highly-prospective ground in four countries: Australia, Colombia, Brazil and the United States and include ground positions in Argentina and Tanzania. Actual expenditure on greenfield exploration activities was $30.7m in 2017 and this included over 64km of diamond, reverse circulation and aircore drilling.
In Australia, in the Laverton district, exploration commenced as part of the Butcher Well and Lake Carey farm-in agreement with Saracen Mineral Holdings. The agreement gives AngloGold Ashanti earn-in rights to 340km2 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 joint venture by spending A$15m within 48 months from start date to earn 51 percent and a further A$10m within 24 months thereafter to earn 70 percent. Work completed as part of the agreement in 2017 included 26.6km of reverse circulation and diamond drilling, 20.4km of aircore drilling and 3,897 ground gravity stations. The work focused on Butcher Well, where drilling returned several very encouraging intercepts. In addition, aircore drilling at the nearby Mt Minnie project returned several encouraging results over 3km of strike extent and follow up reverse circulation and diamond drilling confirmed these results.
In Brazil, exploration focused on the Tromai joint venture (AngloGold Ashanti earning into 70 percent equity from Trek Mining). The work focused on acquisition of regional airborne magnetic, radiometric and electromagnetic data in addition to reverse circulation and diamond drilling of known structures associated with artisanal mining and soil geochemistry. A total of 26,549-line km of magnetic/radiometric data were collected along with 4,560km of electromagnetic data. In addition, 4.7km of diamond drilling and 5.7km of reverse circualtion drilling were completed. Moderate results were received and further work is planned to test targets generated from airborne geophysical techniques.
In the United States, a reconnaissance rotosonic drill programme was completed at the Celina project in Minnesota (100 percent AngloGold Ashanti) with 29 holes drilled for 1,034m. A regional magnetic airborne survey was also completed over a total of 50,697km. In addition, we successfully bid for 238 additional mining claims covering 382km2 in Minnesota In Nevada, AngloGold Ashanti entered into an option agreement with Renaissance Gold for the Silicon Project whereby AngloGold Ashanti will make a series of payments over a three-year period to acquire 100 percent of the project area. Exploration activities conducted at Silicon included geological and spectral mapping, along with surface geochemical sampling in preparation for diamond drill testing of the low-sulphidation vein target in 2018.
In Colombia, at Nuevo Guintar (100 percent AngloGold Ashanti), activities focused on reaching a decision point. Soil sampling, ground magnetic and induced polarisation (IP) programmes were completed along with a 1,478m diamond drilling programme. The principle target was a 500m by 300m gold and multi-element soil geochemistry anomaly with an epithermal signature. No significant results were received from the diamond drilling.
In Tanzania and Argentina, early stage grassroots evaluation and reconnaissance programmes progressed.
Brownfields exploration was carried out in 10 countries, in and around AngloGold Ashanti operations. A total of 594,794m of diamond and reverse circulation drilling was completed during the year.
South Africa: Exploration in the South Africa region continued with a total of four holes drilled at Mponeng’s Western Ultra Deep Levels (WUDLs). All these holes target the Ventersdorp Contact Reef.
Surface drill holes UD60 and UD58A were completed and the sites rehabilitated. Piloting of surface drill hole UD63A and UD61 was completed. Site establishment is underway and the foundations have been completed.
Argentina: At Cerro Vanguardia, drilling achieved 15,620m and focused firstly on testing ground magnetics anomalies around Laura, Sonia and extensions of Vanguardia 2 veins, and secondly on defining lateral and down-dip extensions of mineralisation in poorly-drilled areas of Ariadna, El Palo, Gesica, Patricia, Patty, Teresa, Vanguardia E and 3W, Verónica, Goyo, Portero, Zorro veins. The Claudia joint venture earn-in was concluded ahead of its first-year anniversary. A ground geophysics programme designed to search for shallow blind structures is ongoing and will continue in the first half of 2018.
Brazil: In the Iron Quadrangle, at Cuiaba, exploration activities focused on underground drilling for ore body extension, Mineral Resource conversion and testing of targets. Deep drilling moved from L28-30 to L24 to reach the northern edge of the Cuiaba structure.
Regional mapping and sampling continued around Cuiaba at the Pompeu target, with 45 percent of the soil sampling programme executed and 582 samples collected. The programme, which is aimed at developing drill targets, is expected to be completed in the first half of 2018.
At Lamego, drilling was done at Cabeça de Pedra and at Carruagem. The drilling was predominantly focused on the Carraguem SW orebody where drilling is being undertaken from a hangingwall drive. The results are promising, especially on the normal limb where the Carraguem ore body shows continuity along with Carraguem SW. Mineral Resource modelling is in progress.
Exploration drilling at Córrego do Sítio (CdS) achieved 53,987m, with 78 percent (41,903m) of the drilling being done underground in the CdSI and CdSII mines. The purpose of these drilling programmes was for Mineral Resource conversion to support the production plan. Surface exploration drilling (12,084m) had three distinct purposes, targeting Mineral Resource addition (3,463m), Mineral Resource conversion (8,515m) and new targets (106m).
A total of 38,500m was drilled at Serra Grande. Exploration focused on extension and infill of known ore bodies, this included drilling at Orebody IV, Structure III, Inga, Pequizao, Palmeiras and Mangaba. Positive results were achieved from the Mangaba target that increased the ore body’s grade confidence, while continuity of the inferior zone was confirmed at Flamboyant. Significant intersections were returned from the down-plunge extension of Orebody VI, confirming both grade and thickness, as well as from structures below Orebody VI. At Structure III and on Orebody A, significant intersections were obtained confirming that theory that layers were repeated and the ore zones stacked as well as down-plunge projections.
Colombia: A total of 3,724m were drilled at Gramalote before the decision was made to stop drilling in the first half of the year. Field-based exploration focused on rock chip sampling and soil sampling at the San Javier, Santa Barbara, and Encarnaciones targets to continue delineation of the quartz vein systems identified in those areas.
The La Colosa project was formally placed on care and maintenance in the first quarter and consequently all field activities came to an end in April 2017. As part of the site investigation, geotechnical and hydrology drilling programmes, 946m were drilled.
A total of 2,132m was drilled at Quebradona. In June, the decision was made halt the drilling programme owing to budget constraints. During the second half of the year, work focused on supporting the prefeasibility study with field activities, geological and geotechnical logging.
Tanzania: Drilling programmes focused on both surface and underground operations. Surface drilling projects included Nyankanga Block 5 (Cut 9), Matandani BST, Geita Hill East, Star & Comet Cut 2 NW Extension, Geita Hill-Lone Cone Blocks 1 & 2 (underground potential), Nyankanga 3D Seismic Targets 1 & 5 and reconnaissance drilling at Selous Satellite target. Underground drilling programmes were carried out at Nyankanga Block 5 and Star & Comet Cuts 2 & 3 projects. A total of 347 drill holes (48,561m) were completed.
Surface geological mapping was carried out within the Nyamulilima Block on areas around Selous-Mabe-Xanadu, Roberts South, Star & Comet Cut 2 NW & South as well as on areas around Ridge 8 and in the Star & Comet Cut 3 - Ridge 8 Gap. The focus of the mapping exercise was to establish the surface geology of the prospective areas of Nyamulilima Block and define the potential targets for future exploration. Surface geological mapping was also carried out at Kalondwa Hill, Fikiri- Jumanne-Samena through to Prospect 30 targets, to support target generation and prioritisation of future exploration works.
Guinea: At Siguiri, exploration activities included reconnaissance drilling on the John Deere, Kolenda South and Silakoro NE targets, as well as Mineral Resource definition drilling at Kami, Tubani, Silakoro, Seguelen, Sokunu and Foulata. A total of 48,198m was drilled during the year.
Preliminary interpretation of the airborne magnetic and a radiometric geophysical survey over portions of Block 1 and Block 2 and the Saraya West licence were completed. Seven targets were identified across the Seguelen West area, as well as an area northeast of the Foulata deposit and potential extensions of the Saraya mineralisation within the Saraya West licence.
Target generation and evaluation of the Corridor Blocks and tailings storage facilities exploration licences was carried out. This was followed by field mapping. Soil sampling programmes to cover an untested area in the northwest of Block 1 and on Saraya West PL were completed.
Ghana: No exploration was conducted at Obuasi. At Iduapriem, 7,214m of drilling was completed at the Block 1W/Nueng. Drilling targeted a fold model which predicted the conglomerate reef package near surface. It intersected the conglomerate reef package at 153m to 168m and the later part of the drilling campaign continued to confirm a single, truncated A reef.
At Block 4S, a total of 1,708m was drilled to upgrade material to Indicated Mineral Resource, increasing confidence in the structural model and modelling of reef displacement along the main fault.
A mapping campaign at Block 5 Extension informed the drill plan to intersect the mapped reef packages perpendicularly. A total of 2,412m was drilled with the aim of resolving the full extent of the reef packages along strike and the influence of faults and intrusives on the conglomerates. Recent mapping at the northern extent of the pit reveals continuation of the reefs with a southeast dip direction as opposed to the eastern dip direction that exists within the main pit.
Democratic Republic of the Congo: Drilling (22,364m) at Kibali focused around the Sessenge, Kombokolo, Aerodrome-Pamao, Pamao-Makoke-Megi, Rhino-Agbarabo and KZD areas. Regional exploration covered the Kalimva-Ikamva, Belengo, Aindi Watsa-Dilolo- Zambula, Ndala North and South KZ areas.
At the KCD pit, the results were received for the 1,491m deep diamond drilling to test the down-plunge projection of the Banded Ironstone Formation. Results confirmed the down-plunge extension of the 3000 lode, the 5000 lode and a new lode. A follow up programme from underground will test this further.
At Kalimva, the second phase (26 holes totalling 3,072m) of reverse circulation drilling was completed to test high-grade shoots within the 1.6km long shear system. Logging and assay results received to date support a model with five stacked, plunging shoots of >2g/t within the 1.6km strike. At Ikamva, a fence of seven reverse circulation holes were drilled to follow up on the pit optimisation done in the western part of Ikamva. The observed mineralised zone is thinner and deeper than expected and some of the holes ended in mineralisation. Another phase of close spaced drilling is planned.
Mali: At Sadiola, a total of 14,260m of drilling was completed. Reverse circulation drilling for oxide potential was completed at Sadiola South, Tambali West, Dogofile South, Timbabougouni, Voyager West, Tabakoto West and Lakanfla. Drilling focused on the new oxide targets identified at a targeting workshop held in June with participants from SEMOS, IAMGOLD and AngloGold Ashanti.
Australia: A total of 88,871m of exploration drilling was done at Sunrise Dam targeting the Vogue Deeps, the western area of Vogue 1800, 1600 and 1400 Blocks, Cosmo, northern and down dip extensions to Cosmo and Cosmo East, Dolly Porphyry, Carey Shear, Elle and Astro North orebodies.
The drilling results from Vogue continue to be encouraging with significant intercepts returned from all panels. Assay results from definition drilling in the southern panel of Cosmo and Cosmo East down dip were returned with one significant intercept returned from Cosmo East down dip, and three significant intercepts from an isolated area between the Dolly and Cosmo ore bodies. Further drilling from the southern panel will be completed during 2018.
Drilling of the Carey Shear continued from a drill platform in the COS1630. One significant intercept was returned for Carey Shear with two further significant intercepts returned from further up hole. Drilling of this target will continue in the first half in 2018.
Mineral Resource definition drilling of the Elle target continued and Mineral Resource creation drilling to the south commenced. Seven significant intercepts were returned for Elle, and nine significant intercepts related to the Midway shears in this area.
Blue sky tangible drilling of Astro North began and assay results are pending.
At Tropicana, a total of 93,428m of drilling was completed. During the first half of 2017, drilling targeted Sanpan, Zebra, New Zebra, Hat-Trick, Springbok, Southern Mining Lease (ML) conceptual targets, Angel Eyes, Beetlejuice, Crouching Tiger, Kamikaze and Little Wing targets.
Resource development drilling continued to complete extensional drilling at Boston Shaker to evaluate the underground potential down dip of the Long Island pit design. Following the scoping study which is currently underway, a prefeasibility study on underground mining will begin in 2018, in conjunction with infill drilling programmes.
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.
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.
|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.
The South Africa operations comprise a number of deep level underground mines as well as surface operation that are processing low grade stockpiles and re-treating Tailings Storage Facilities. For the year ended 31 December 2017, it was comprised of Vaal River operations (Moab Khotsong and Kopanang), surface operations and West Wits operations (Mponeng). The Vaal River operations were sold subsequent to year end.
Operations in South Africa are powered by electricity from Eskom Holdings Limited which supplies 95 percent of the electricity used in South Africa.
The Witwatersrand Basin comprises a six-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.
|•||Vaal River operations|
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).
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 Reserve 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
|Capacity (000 tonnes/month)||180||260||140||315|
|Capacity (000 tonnes/month)||—||260||—||—|
|Sold effective28 February 2018|
Vaal River - Kopanang
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 a by-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
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 in South Africa produce gold by processing surface material such as low grade stockpiles and the re-treatment of Tailings Storage Facilities. Surface operations comprise Vaal River Surface, West Wits Surface and Mine Waste Solutions (MWS).
Low grade stockpiles
The Vaal River and West Wits operations extract gold from various low grade stockpiles where there is spare metallurgical capacity. Uranium is produced as a by-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)
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 2.26 million tonnes per month. The uranium plant has been decommissioned.
West Wits operations
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.
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).
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 - Summary of metallurgical operations
|Mponeng Gold Plant||Savuka Gold Plant|
|Capacity (000 tonnes/month)||160||280|
West Wits - Mponeng
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 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 two sub-shafts. Ore is treated and smelted at the mine’s gold plant. The plant has a monthly capacity of 160,000 tonnes. In 2017, TauTona mine located to the northeast of Mponeng was closed and the infrastructure and residual Mineral Resource and Ore Reserve transferred to Mponeng.
* BMD is 1,828.8m Above Mean Sea Level (AMSL)
GHANA - Summary of metallurgical operations
|Capacity (000 tonnes/month)||180||90||418|
Ghana – Iduapriem
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.
Iduapriem is an open-pit mine and its processing facilities include a Carbon-in-pulp (CIP) plant.
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
Obuasi, wholly owned by AngloGold Ashanti since 2004 is currently in a care and maintenance phase and finalising a feasibility study to restart operations, it 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.
Power is supplied to the mines by the Volta River Authority and the transmission is done by the GridCo Company.
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 in south‑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.