AU AngloGold Ashanti
Filed: 27 Mar 20, 3:46pm
As filed with the Securities and Exchange Commission on 27 March 2020
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|☐||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 2019
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||Trading Symbols||Name of each exchange on which registered|
|American Depositary Shares||AU||New York Stock Exchange|
|Ordinary Shares||AU||New York Stock Exchange*|
|5.375% Notes due 2020||AU/20||New York Stock Exchange|
|5.125% Notes due 2022||AU/22||New York Stock Exchange|
|6.50% Notes due 2040||AU/40||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||415,301,215|
|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 x 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 x
|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 x No ☐
|Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).|
Yes x No ☐
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.|
(Check one): Large Accelerated Filer x
Accelerated Filer ☐
Non-Accelerated Filer ☐
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
|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 x 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 x
|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). 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 TZS are to the lawful currency of the United Republic of Tanzania, references to GHS, cedi or Gh¢ are to the lawful currency of Ghana and references to British pounds are to the lawful currency of the United Kingdom.
Non-GAAP financial measures
In this annual report on Form 20-F, AngloGold Ashanti presents the financial items “total cash costs net of by-product revenue”, “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 net of by-product revenue 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 net of by-product revenue, 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 net of by-product revenue”, “ -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 net of by-product revenue, 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 net of by-product revenue, all-in costs and all-in sustaining costs from each operation and as a consequence includes our share of the total cash costs net of by-product revenue, 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 net of by-product revenue, 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 net of by-product revenue, 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 “all-in sustaining costs”, “all-in sustaining costs per ounce”, “all-in costs”, “all-in costs per ounce”, “total cash costs net of by-product revenue” and “total cash costs per ounce” for each of the three years in the period ended 31 December 2019 is presented herein. See “Item 5A: Operating Results-Non-GAAP analysis”.
On 12 February 2020, AngloGold Ashanti announced that it reached an agreement to sell its remaining South African producing assets and related liabilities to Harmony Gold Mining Company Limited. The South African asset sale was assessed as a major geographical area of operations and part of a single co-ordinated plan to dispose of a major geographical area of operations and accordingly, it was classified as a discontinued operation.
The financial information contained herein for the years ended 31 December 2019, 2018 and 2017 has been restated to separate continuing operations from discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, as a consequence of the classification of the sale of the South African producing assets and related liabilities as a discontinued operation.
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 (including as a result of the COVID-19 pandemic), 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 (including as a result of the COVID-19 pandemic), 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 (including as a result of the COVID-19 pandemic). 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.
VCR: Ventersdorp Contact Reef.
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 (AISC): 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 gold price received per ounce: Average gold price received per ounce is the sum of proceeds from gold sales in the spot market and sales from Mine Waste Solution to Franco-Nevada Corporation at contracted prices, divided by gold sales in ounces.
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.
Market spot gold price: The price of gold traded at any given moment on the Over-The-Counter(OTC) wholesale market of which the transaction will be settled in two business days’ time.
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 $750 million 5.125 percent bonds due 2022.
Region: Defines the operational management divisions within AngloGold Ashanti Limited, namely South Africa, Continental Africa (DRC, Ghana, Guinea, Mali and Tanzania), Australia and the Americas (Argentina and Brazil).
Related party: Parties are considered related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or if such parties are under common control.
Significant influence: The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decision of an entity so as to obtain economic benefit from its activities.
Strate: The licensed Central Securities Depository (CSD) for the electronic settlement of financial instruments in South Africa.
Sustaining capital: Capital expenditure incurred to sustain and maintain existing assets at their current productive capacity in order to achieve constant planned levels of productive output.
Total cash costs (net of by-product revenue): Total cash costs net of by-product revenue include site costs for all mining, processing and administration and are inclusive of royalties and production taxes. Depreciation, depletion and amortisation, rehabilitation, corporate administration, employee severance costs, capital and exploration costs are excluded. Total cash costs net of by-product revenue per ounce are the attributable total cash costs divided by the attributable ounces of gold produced.
Weighted average number of ordinary shares: The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, weighted on a time basis for the period during which they have participated in the income of the group, and increased by share options that are virtually certain to be exercised.
|$, US$, USD, US dollars or dollar||United States dollars|
|A$, Australian dollars or AUD||Australian dollars|
|€ or Euro||European Euro|
|GHS, 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|
|Companies Act||South African Companies Act, No. 71 of 2008, as amended|
|DRC||Democratic Republic of the Congo|
|ERP||Enterprise resource planning|
|Exchange Act||United States Securities Exchange Act of 1934, as amended|
|FVTOCI||Fair value through other comprehensive income|
|FVTPL||Fair value through profit or loss|
|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 2016 edition|
|SEC||United States Securities and Exchange Commission|
|Securities Act||United States Securities Act of 1933, as amended|
|T or t||Tons (short) or tonnes (metric)|
|Tpa or tpa||Tonnes/tons per annum|
|TSF||Tailings storage facility|
|US/U.S./USA/United States||United States of America|
|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 2019, 2018 and 2017 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 2016 and 2015 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|
|Revenue from product sales||3,525||3,336||3,394||4,223||4,015|
|Cost of sales||(2,626||)||(2,584||)||(2,607||)||(3,401||)||(3,294||)|
|Gain (loss) on non-hedge derivatives and other commodity contracts||5||(2||)||—||19||(7||)|
|Corporate administration, marketing and other expenses||(82||)||(76||)||(64||)||(61||)||(78||)|
|Exploration and evaluation costs||(112||)||(98||)||(105||)||(133||)||(132||)|
|Impairment, derecognition of assets and p/l on disposal||(6||)||(7||)||(2||)||—||—|
|Other expenses (income)||(83||)||(79||)||(150||)||—||—|
|Other operating expenses||—||—||—||(110||)||(96||)|
|Operating profit (loss)||621||490||466||495||337|
|Foreign exchange losses||(12||)||(9||)||(11||)||(88||)||(17||)|
|Finance costs and unwinding of obligations||(172||)||(168||)||(157||)||(180||)||(245||)|
|Fair value adjustments||—||—||—||9||66|
|Share of associates and joint ventures’ profit (loss)||168||122||22||11||88|
|Profit (loss) before taxation||619||445||328||269||257|
|Profit (loss) after taxation from continuing operations||369||233||165||80||46|
|Profit (loss) from discontinued operations||(376||)||(83||)||(336||)||(116||)|
|Profit (loss) for the year||(7||)||150||(171||)||80||(70||)|
|Allocated as follows|
|- Continuing operations||364||216||145||63||31|
|- Discontinued operations||(376||)||(83||)||(336||)||—||(116||)|
|- Continuing operations||5||17||20||17||15|
|Basic earnings (loss) per ordinary share (U.S. cents)||(3||)||32||(46||)||15||(20||)|
|Earnings (loss) per ordinary share from continuing operations||87||52||35||15||8|
|Earnings (loss) per ordinary share from discontinued operations||(90||)||(20||)||(81||)||—||(28||)|
|Diluted earnings (loss) per ordinary share (U.S. cents)||(3||)||32||(46||)||15||(20||)|
|Earnings (loss) per ordinary share from continuing operations||87||52||35||15||8|
|Earnings (loss) per ordinary share from discontinued operations||(90||)||(20||)||(81||)||—||(28||)|
|Dividend per ordinary share (U.S. cents)||7||6||10||—||—|
|The selected financial information presented for the years ended 31 December 2016 and 2015 has not been reclassified for the changes in disclosure of "Special items" or restated to reflect the disposal of the South African assets and liabilities as a discontinued operation, as such financial information cannot be provided on a reclassified or restated basis without unreasonable effort and expense. The discontinued operation reported in 2015 related to the sale of Cripple Creek &Victor gold mine to Newmont Corp.|
|As at 31 December|
|(in millions, except share and per share amounts)|
|Consolidated balance sheet data|
|Right of use assets||158||—||—||—||—|
|Investments in associates and joint ventures||1,581||1,528||1,507||1,448||1,465|
|Trade, other receivables and other assets||122||102||67||34||13|
|Cash restricted for use||31||35||37||36||37|
|Other non-current assets||—||—||—||—||18|
|Trade, other receivables and other assets||250||209||222||255||196|
|Cash restricted for use||33||31||28||19||23|
|Cash and cash equivalents||456||329||205||215||484|
|Assets held for sale||601||—||348||—||—|
|EQUITY AND LIABILITIES|
|Share capital and premium||7,199||7,171||7,134||7,108||7,066|
|Accumulated losses and other reserves||(4,559||)||(4,519||)||(4,471||)||(4,393||)||(4,636||)|
|Environmental rehabilitation and other provisions||697||827||942||877||847|
|Provision for pension and post-retirement benefits||100||100||122||118||107|
|Trade, other payables and provisions||15||3||3||4||5|
|Trade, other payables and provisions||586||594||638||615||516|
|Liabilities held for sale||272||—||126||—||—|
|Total equity and liabilities||6,863||6,643||7,219||7,153||7,284|
|Number of ordinary shares as adjusted to reflect changes in share capital||415,301,215||412,769,980||410,054,615||408,223,760||405,265,315|
|Share capital (exclusive of long-term debt and redeemable preference shares)||17||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||95||70||130||—||—|
US cents per ordinary share(2)
|Since 2017, the dividend policy allows the company's Board of Directors, 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.|
|Dividends for these periods were declared in South African cents. US dollar cents per share figures have been calculated based on exchange rates prevailing on each of the respective payment dates.|
For further information on the company’s policy on dividend distributions, see “Item 8A: Consolidated Financial Statements and Other Financial Information—Dividends”.
|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, silver and sulphuric acid. 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 2019, the market spot gold price traded from a low of $1,270.20 per ounce to a high of $1,552.35 per ounce, remaining well below a peak of $1,900 per ounce in September 2011. Between 1 January 2020 and 19 March 2020, the market spot gold price traded between a low of $1,469.80 per ounce and a high of $1,679.60 per ounce. On 19 March 2020 the afternoon price for gold on the London Bullion Market was $1,474.25 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, the market spot gold price decreased from a high of $1,687.00 per ounce on 6 March 2020 to a low of $1,469.80 per ounce on 19 March 2020 in the midst of a wider market dislocation related to the COVID-19 pandemic and despite the alleged investor perception of gold as a relatively safe haven in periods of market volatility.
Any sharp or prolonged fluctuations in the price of gold can have a material adverse impact on the company’s profitability and financial condition.
In addition, any announcements or proposals by central banks, such as 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.
Events that affect the supply and demand of gold, such as government intervention, may have an impact on the price of gold. 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 Chinese government’s anti-corruption programme, which put limited pressure on demand for gold ornaments and so-called “gift bars”. These and similar policies in India, China or other large gold-importing countries could adversely affect demand for, and consequently prices of, gold and, as a result, may adversely affect AngloGold Ashanti’s financial condition and results of operations.
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, gold.
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 price of silver has also experienced significant fluctuations in past years. During 2019, the price varied between a low of $14.35 per ounce and a high of $19.57 per ounce. On 19 March 2020, the price of silver was $12.11 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, 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 U.S. dollar lowers local cost of sales in U.S. dollar terms.
Exchange rate movements may have a material impact on AngloGold Ashanti’s operating results. For example, based on average exchange rates received in 2019, 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 cost of sales and total cash costs per ounce of approximately $17 million and $4 per ounce, respectively.
From time to time, AngloGold Ashanti may implement currency hedges. Such hedging strategies may not be successful, and any of AngloGold Ashanti unhedged exchange payments will continue to be subject to market fluctuations.
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 $61 per barrel of Brent Crude in 2019. As of 19 March 2020, the price of oil was at $24.43 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, cost of sales and total cash costs per ounce of all its operations change by approximately $2 million and $0.6 per ounce, respectively. The cost of sales and total cash costs per ounce of certain of the company’s mines, particularly Siguiri, Geita, Tropicana and Iduapriem 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 of new levies.
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 2020, the price of flat hot rolled coil (North American Domestic FOB) was $492.62 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, electricity is supplied by Eskom, a state-owned power generation company. 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 the past decade, Eskom introduced on several occasions a schedule of rolling blackouts, or “load shedding”. For example, at the end of 2018, Eskom was forced to implement load shedding due to a combination of factors including plant breakdowns and urgent plant maintenance. A high degree of load shedding has been continuous ever since, including in early 2020. Furthermore, Eskom carries a significant amount of debt and, while it has been seeking ways to reduce its liabilities, its financial situation remains precarious. These operational and financial issues at Eskom may have a materially adverse impact on the company’s South African operations.
There can be no assurance as to the existence or nature of any government intervention with respect to tariff increases in the future. Other difficulties at Eskom, relating to a large financial deficit, may result in additional tariff increases. As energy represents a large proportion of the company's operating costs in South Africa, tariff increases have had, and any future increases will have, a materially adverse impact on the cost of sales and total cash costs per ounce of the company's South African operations.
In Ghana and Brazil, the company has also identified a risk of energy shortages. The company’s mining operations in Ghana depend on hydro and thermal power supplied by a state-controlled national grid operator. In 2014, the company experienced extended power interruptions in Ghana. Although the situation has improved since then, the grid is still subject to disturbances and voltage
fluctuations during periods of limited electricity availability, which can damage equipment. 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.
Certain of our mining operations depend on supplies of fuel delivered by road which have been disrupted in the past and may be disrupted again in the future. Any such disruptions could negatively impact operating costs and cashflows from these 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 both the European Monetary Union and its common currency, the Euro, and the European Union (EU), in their current form, particularly following the withdrawal of the United Kingdom from the EU on 31 January 2020 and the uncertainty around any subsequent negotiations and the resulting terms of any new economic and security relationship, including trade arrangements, between the EU and the United Kingdom. Concerns also exist regarding the negative impacts of the downgrade of the sovereign credit rating of the Republic of South Africa in recent years.
Concerns remain regarding South Africa’s credit rating. The country has been assigned BB (negative outlook), Baa3 (negative outlook) and BB+ (negative outlook) status by S&P Global, Moody’s and Fitch, respectively. See “-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”.
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. Any economic 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. The COVID-19 pandemic has resulted in a sharp decline in global financial markets and a significant decrease in global economic activity, which may have a material adverse effect on worldwide demand for gold and may also materially adversely affect the profitability of our operations or our financial condition. See also “-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”.
Other factors 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;|
|•||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 U.S. dollar or an increase in the U.S. 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. Furthermore, when inflation reaches highly inflationary levels in
a country in which the company operates, social unrest and union activity may increase, which in turn may have an adverse effect on AngloGold Ashanti’s operational costs and results of operation in that country.
Of particular concern is the inflation rate in Argentina which increased from an average of ten percent in 2012 to 40.5 percent in 2016. Inflation in Argentina was recorded at 24.8 percent in 2017 and rose to 47.6 percent in 2018, and 53.8 percent in 2019. Hyper-inflationary reporting will be reflected in the financial statements of our local subsidiaries. However, hyper-inflationary movements are not reflected in the group’s consolidated financial statements as our local Argentinian subsidiary is deemed to have a U.S. dollar functional currency.
Mining companies are subject to 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 impact the company’s ability to develop or operate the relevant project as planned or increase the costs of such 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.
Some of the risks inherent in the development and construction of a new mine or the extension of an existing mine include:
|•||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 approvals; and|
|•||availability of funds to finance construction, development and environmental rehabilitation activities.|
The remote location of many mining properties, delays in obtaining necessary permits and approvals, as well as 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.
For example, AngloGold Ashanti may prove unable to successfully develop the La Colosa and Gramalote projects, or the Nuevo Chaquiro deposit that is part of the Quebradona project in Colombia, as well as other potential exploration sites due 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, the inability of any such project to meet AngloGold Ashanti’s investment hurdle rate, and delays that could result in the expiry of permits. See “-Mining companies are subject to extensive environmental, health and safety 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 not be developed as planned or may be less profitable than anticipated or even be loss-making. 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 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, following completion of enhanced prefeasibility studies, AngloGold Ashanti announced the maiden Ore Reserve for the Quebradona project in February 2019. No assurance can be given that Ore Reserve estimates or other estimates are accurate or that the indicated levels of gold, copper 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 estimates 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 is inherently hazardous, and mining companies are subject to the risk of disruptions to their operations, which may adversely impact cash flows and overall profitability.
Gold mining operations are subject to risks of 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, drilling, blasting or transportation resulting in injury, loss of life or damage to equipment or infrastructure;|
|•||air, land and water pollution;|
|•||social or community disputes or interventions;|
|•||security incidents, including the activities of artisanal or illegal miners;|
|•||surface or underground fires or explosions;|
|•||labour force disputes and disruptions;|
|•||loss of information integrity or data;|
|•||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 of mine shafts;|
|•||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;|
|•||gold bullion or concentrate theft;|
|•||corruption and fraud;|
|•||allegations of human rights abuses;|
|•||seismic activity; and|
|•||other natural phenomena, such as floods, droughts or weather conditions, potentially exacerbated by climate change.|
Any of these events could, individually or in the aggregate, have a material adverse effect on the company’s results of operations and financial condition.
Seismic activity is of particular concern in underground mining operations, particularly in South Africa due to the extent and extreme depth of mining, and also in Australia and Brazil due to the depth of mining and residual tectonic stresses. Seismic events have caused death and injury to employees and contractors as well as safety-related stoppages and may continue to 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, in South Africa, Mponeng experienced during 2019 a production loss of approximately 5,700m2 due to rock burst damages and other internal seismic procedural stoppages. Furthermore, on 5 March 2020, a seismic event at Mponeng resulted in three fatalities and, on 16 March 2020, another fatality occurred as the result of a tramming accident. As a result, operations in the affected areas at Mponeng have been suspended pending the outcome of investigations relating to such events.
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 which may adversely affect AngloGold Ashanti’s business, results of operations and financial condition.
Mining companies face strong competition and industry consolidation.
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.
Further, industry consolidation may lead to increased competition and may harm AngloGold Ashanti’s operating results. A number of transactions have recently been completed in the gold mining industry. In this regard, some of AngloGold Ashanti’s competitors have made acquisitions or entered into business combinations, joint ventures, partnerships or other strategic relationships. For example, Barrick Gold Corporation completed its merger with Randgold Resources Limited in January 2019 and Newmont Corporation (formerly Newmont Mining Corporation) completed its business combination with Goldcorp Inc. Similar consolidations in the form of acquisitions, business combinations, joint ventures, partnerships or other strategic relationships may continue in the future. The companies or alliances resulting from these transactions or any further consolidation involving AngloGold Ashanti’s competitors may benefit from greater economies of scale, significantly larger asset bases and broader differentiation of mining assets in respect of geographies and commodities than AngloGold Ashanti. In addition, following such transactions certain of AngloGold Ashanti’s competitors may decide to sell specific mining assets increasing the availability of such assets in the market.
An excess of mining assets available for sale could have a material adverse impact on any of the company’s contemplated asset sales and could result in sales processes taking longer to complete or not completing at all or not realizing the full value of the assets being disposed of. Such developments could have a material adverse effect on the company’s business, operating results and financial condition.
Mining companies are increasingly expected to operate in a sustainable manner and to provide benefits to affected communities. Failure to do so can result in legal suits, additional costs to address social or environmental impacts of operations, 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 and resource extraction activities, businesses in general and large multinational mining corporations in particular face increasing public scrutiny of their activities. 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.
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. Social media and other web-based tools to share user-generated content further increases the potential scope and force of public scrutiny. Adverse publicity in cases where companies are believed not to be creating sufficient social and economic benefit may result in reputational damage, active community opposition, allegations of human rights abuses, legal suits and investor withdrawal.
Mining operations are often located at or near existing towns and villages, natural waterways and other infrastructure or natural resources. As the impacts of dust generation, waste storage, water pollution or water shortages may be 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 a 2017 popular consultation in the Colombian municipality of Cajamarca in the Tolima department, which hosts the company’s La Colosa exploration site, AngloGold Ashanti’s management has suspended much of the current fieldwork around the project until the related environmental permits are granted and there is more certainty about mining activity in Colombia. Similarly, in the Colombian town of Piedras in the Tolima department, which is not located in the immediate vicinity of the La Colosa exploration site, AngloGold Ashanti is also contesting a 2013 popular consultation which attempted to ban all mining activities in the area. See “Item 8A: Legal Proceedings-Colombia”. If AngloGold Ashanti is unsuccessful in challenging these popular consultations, there could be an adverse impact on AngloGold Ashanti’s reputation, its ability to develop its mining concessions, and its results of operations and financial condition.
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 (NGOs), 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 at Siguiri in Guinea. Delays in projects as well as increased costs 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.
Mining companies are subject to extensive environmental, health and safety laws and regulations.
AngloGold Ashanti’s operations are subject to extensive environmental, health and safety laws and regulations in the various jurisdictions in which it operates. These regulations, as well as international standards for the industry, 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; safety and health of employees and 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, health and safety laws and regulations is expected to continue to be significant to AngloGold Ashanti. From time to time, new or updated 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 incident or failure to comply with applicable regulations, the company’s results of operations and financial condition could be adversely affected. 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, health and safety laws and regulations or the terms of AngloGold Ashanti’s permits.
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 and Energy Mining Inspectorate whose inspectors routinely issue such notices. For example, in 2019, 8 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 11,324, 4,680 and 1,226 ounces of gold production from the South African region operations during 2017, 2018 and 2019, respectively. In March 2020, operations in certain areas at Mponeng have been suspended pending the outcome of investigations in connection with three fatalities caused by a seismic event and one fatality due to a tramming accident.
AngloGold Ashanti’s reputation could be damaged by any significant governmental investigation or enforcement action for non-compliance with 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.
Failure to comply with applicable environmental, health and safety 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 governmental authorities 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 instance, the Colombian Department of the Environment, Housing and Territorial Development (DoE) issued a fine of $70,000 against the company. Although the amount of the fine is not significant, the repeated or continuous breach of such applicable environmental laws, among other grounds, could be used as the basis for legal action by the Colombian government that could prohibit AGAC from doing business with the Colombian government for a period of five years. In such circumstances, AGAC’s three core concession contracts relating to the La Colosa project could be cancelled depending on the severity of the violations. As a result, AGAC could be required to abandon the La Colosa project and its other existing mining concession contracts as well as any pending proposals for new mining concession contracts of AGAC. However, this would not affect those of other companies of the AngloGold Ashanti group operating in Colombia. Separately, as part of the La Colosa class action lawsuit, Tolima’s Administrative Court ordered in October 2016 that a technical study be prepared to determine whether the La Colosa project presents a “threat” to the environment during its exploration phase. In December 2017, Ibagué's Third Administrative Court ordered that another similar technical study be prepared for the La Colosa project. AGAC appealed these orders and the matter is currently pending before the Council of State of Colombia (the highest court for administrative matters). See “Item 8A: Legal Proceedings-Colombia”.
Environmental impacts arising in connection with AngloGold Ashanti's operations could lead to the imposition of legal obligations, including the remediation of environmental contamination, claims for property damage and personal injury from adjacent communities and restrictions on mining operations. For example, brief gold processing stoppages after environmental incidents, such as pipeline failures or deficiencies in water management systems, have occurred previously at AngloGold Ashanti's operations. In addition, closure of a mine could trigger or accelerate obligations, including to conduct 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, could have a material adverse impact on AngloGold Ashanti’s results of operations and financial condition.
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 operations, 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 continued scrutiny. As there are few, if any, effective substitutes in extracting gold from the ore, any ban or material restrictions on the use of such 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 other failure of a waste rock or tailings storage facility (TSF), including any associated dam, can be significant. An incident at AngloGold Ashanti’s operations could result, among other things, in enforcement, obligations to remediate environmental contamination, negative press coverage, and claims for property or natural resources damages and personal injury by adjacent communities. Incidents at other mining companies’ operations could result in governmental action to tighten regulatory requirements and restrict certain mining activities, in particular with respect to TSFs. See “Item 4B: Business Overview-Environmental, Health and Safety Matters”.
For example, a TSF at the Córrego do Feijão iron ore mine owned by Vale at Brumadinho in the state of Minas Gerais in Brazil burst in January 2019. Tailings reached the mine’s administrative area and part of the local community, reportedly resulting in death or injury to hundreds of people. As a result of this incident, environmental licensing processes in Brazil for mining companies have become more difficult, especially those involving TSFs. Since this incident, the Brazilian authorities have been considering, and in some cases have adopted, stricter laws and regulations applicable to the approval, licensing, construction, management, closure and decommissioning of TSFs in Brazil. It is expected that there will be further changes in federal and state legislation and regulation, as well as much more intense scrutiny and control of, as well as cost increases associated with inspecting, maintaining and constructing TSFs. Certain types of TSFs may be prohibited, and any such prohibitions may result in operational disruptions until alternate facilities can be constructed or existing facilities can be reinforced. In addition, it is believed that communities will increasingly seek engagement and information with respect to the adequacy of the safety measures in place to protect them from TSF-related incidents. For example, the National Congress is currently considering Federal Bill No. 550/2019, which, among other measures, contains specific requirements in respect of the decharacterization (descaracterização) and decommissioning of TSFs, including the removal of tailings material from existing and future TSFs. If adopted in its current form, the bill may cause a significant increase in provisions for decharacterization, decommissioning and closure, may result in additional operating or capital costs for the company and could potentially have an adverse impact on production levels at the affected operations over the next 24 months. The mining sector is liaising with the legislative authorities and other stakeholders in an effort to introduce amendments to this proposed bill which would mitigate some of the concerns identified by the mining industry, in particular, regarding the requirement to remove tailings material from decommissioned TSFs. See “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine-Americas-Brazil”. Furthermore, at the federal level, the Brazilian National Mining Agency (ANM) issued Resolution No. 13/19 in August 2019 prohibiting the upstream method for the construction or heightening of tailings dams throughout the national territory of Brazil. ANM Resolution No. 13/19 further requires the deactivation of TSFs constructed or heightened upstream or by an “unknown” method by 15 September 2021 as well as the decommissioning of such TSFs by 15 August 2022 to 15 September 2027 (depending on the capacity volume). As a result, the Serra Grande mine in the state of Goiás is in the process of reinforcing the dam walls of its upstream TSF in advance of its expected deactivation by 15 September 2021. Additionally, public prosecutors have been pursuing an active role in the enforcement of new state and federal laws and regulations by way of legal action against several mining companies to compel compliance with these new rules. The company’s Brazilian subsidiaries are currently involved in such lawsuits in the state of Goiás in respect of the Serra Grande tailings dam and in the state of Minas Gerais in relation to the Cuiabá tailings dam. The outcome of these lawsuits cannot be predicted but, if resolved adversely to the company, may oblige the company to accelerate the decommissioning of the Serra Grande tailings dam, including possibly the complete removal of tailings material, by 15 September 2022 and could result in the suspension of the company’s operational permit for the Cuiabá tailings dam. As a result, such adverse judgments may result in additional and accelerated operating or capital costs for the company, including costs exceeding the company’s current provisions for decommissioning these sites, and could have an adverse impact on the company’s production levels at the affected operations over the next 24 months, all of which may adversely affect the company’s financial condition and results of operations. See “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine-Americas-Brazil” and “Item 8A: Legal Proceedings-Brazil”.
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. See “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine”.
AngloGold Ashanti’s provisions for decommissioning and for restoration (excluding joint ventures, but including liabilities related to assets held for sale) totalled $724 million in 2017, $637 million in 2018 and $730 million in 2019. 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). As such, estimates may 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. As a result of commitments made at the UN Climate Change Conference in Durban, South Africa in December 2011, certain members of the international community negotiated a treaty at the Conference of the Parties of the UN Framework Convention on Climate Change in Paris in December 2015 (Paris Agreement). The Paris Agreement, which came into force on 4 November 2016, requires developed countries to set targets for emissions reductions. Additional measures addressing GHG emissions may be implemented at national or international levels in various countries.
For example, in South Africa, the Carbon Tax Act, No. 15 of 2019, imposing a tax on carbon dioxide equivalent of GHG emissions, took effect on 1 June 2019. The tax will be implemented in a phased manner, taking into account South Africa’s Nationally Determined Contributions (NDCs) commitment under the Paris Agreement to reduce greenhouse gas emissions. The first phase, which runs from June 2019 to December 2022, imposed a tax of ZAR120/ton carbon dioxide equivalent (CO2-e) of direct GHG emissions, which will increase by CPI plus two percent up to 2022 and in line with inflation thereafter. As this first phase is designed to be revenue-neutral in terms of its aggregated impact, a system of rebates is in place effectively reducing the actual rate to be in a range of ZAR6/ton to ZAR48/ton. See also “Item 4B: Business Overview-Environmental, Health and Safety Matters”.
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, including for those costs or taxes passed on by electricity utilities which supply the company’s operations. AngloGold Ashanti could also 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.
Other countries, including Australia and 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. See also “Item 4B: Business Overview-Environmental, Health and Safety Matters”.
In addition, AngloGold Ashanti’s operations could be exposed to a number of physical risks from climate change, such as changes in rainfall rates or patterns, rising sea levels, reduced process water availability, higher temperatures and extreme weather events. Such events or conditions, including 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 including, but not limited to the U.S. Dodd-Frank Act, the EU Regulation 2017/821 on supply chain due diligence obligations for EU importers of gold originating from conflict-affected and high-risk areas, the OECD 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.
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 and 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 in Guinea 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”.
Similarly, an outbreak of infectious diseases, a pandemic or other public health threat, such as the recent outbreak of the SARS-CoV-2 virus responsible for COVID-19, or a fear of any of the foregoing, could adversely impact our operations by causing supply chain delays and disruptions, import restrictions or shipping disruptions, as well as operational shutdowns (including as part of government-mandated containment measures). For example, the both the Argentinian and South African governments have recently imposed significant restrictions on the movement of goods, services and persons, including a nationwide lockdown of businesses and its citizens (quarantine).In Brazil, the State of Goiás has also imposed similar restrictions. Such disruptions and other manufacturing and logistical restraints could result in extended lead times in supply and distribution networks, as well as the exercise of force majeure measures, the impacts of which could eventually result in stoppage of mining operations. In addition, restrictions in travel and border access may impact the company’s ability to source and transport goods and services required to operate mines and to transport gold doré to refineries. 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, COVID-19 or other epidemic outbreak or that there would be no related consequences, such as severe food shortages and social impact. Epidemic-related export restrictions (including as a result of government regulation and prevention measures) 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 UK regulators undertook a review of the fixing process.
In 2015, the Fix was replaced by the London Bullion Market Association (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 LBMA 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 LBMA Silver Price Benchmark, ICE, under the auspices of the LBMA 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 LBMA Gold Price Benchmark in the future, AngloGold Ashanti could be implicated more directly, which may have an adverse effect on its reputation.
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. Any violation of such laws 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 (IT) 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.
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. There can be no assurance that these efforts will always 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 early 2020, there was an unsuccessful cybersecurity attack (“brute-force” attack) attempting to breach the company’s email servers. No breach was recorded.
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 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 essential 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, the failure to comply with the General Data Protection Regulation (GDPR) may lead to a fine of up to four percent of a company’s worldwide turnover or up to €20 million. Also, the GDPR has a scope that extends beyond the borders of the EU and does not only affect EU operations.
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, Tanzania, 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 organised crime, 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.
Attacks on mining companies (for example, attacks targeting gold rooms where smelted gold bars are stored before being transported to other facilities) have also been occurring over the last couple of years, especially in Brazil and South Africa, and the risk of future attacks remains a threat and could adversely affect the company’s activities.
Intrusions onto the company’s tenement and operational areas, including artisanal and illegal mining-related activities in particular, continue to be a challenge. The most significant security challenges remain in Tanzania, Guinea, Mali and Ghana, in areas where there is endemic poverty, high levels of unemployment and an increased level of organisation and funding of criminal activity. See “-Artisanal and illegal 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, in 2018, the withdrawal of the Gendarmes, Malian paramilitary units, from the closed Yatela mine in Mali, resulted in a mass invasion of illegal miners into the dormant pit, resulting in numerous fatalities amongst such illegal miners due to landslides. In the event that continued invasions 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. AngloGold Ashanti has also been publicly accused of inadequate resettlement practices at its Siguiri operation in Guinea by local and international non-governmental organisations (NGO), which poses reputational risk.
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, in particular prolonged or sustained outbreaks. For example, during August 2014, cases of the Ebola virus were reported in Siguiri, which is located near AngloGold Ashanti’s Siguiri mine in Guinea. The company implemented certain restrictions on travel to and from the Siguiri mine as a precaution. As the Ebola virus 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. The DRC also experienced an outbreak of the Ebola virus in 2018, which is being monitored continuously.
Similarly, the company operates mines in countries that have confirmed cases of COVID-19 and resulting death. In some countries, national or state governments have declared a state of emergency empowering such governments to take actions or impose restrictions to contain the virus that otherwise would not be permitted under the applicable legal and regulatory framework. Governments have also imposed certain restrictions on travel or business activities as precautionary measures, including nationwide lockdowns (quarantine), which may disrupt the company’s activities and operations and even lead to a full or partial shutdown of
the company’s mining operations in those countries. For example, on 21 March 2020, following the Argentinian government’s decision to impose a nationwide lockdown (quarantine), including travel restrictions, border closings and shutdown of most industries, until 31 March 2020, Cerro Vanguardia S.A. (CVSA) was required to temporarily suspend mining activities. Similarly, on 23 March 2020, the South African government announced a 21-day nationwide lockdown, effective from midnight on 26 March 2020, resulting in the temporary suspension of mining activities of the company’s South African operations particularly Mponeng, and the partial suspension of mining activities at Mine Waste Solutions and Surface Operations.On 26 March 2020, in Brazil, the State of Goiás extended a set of restrictions on the operation of non‐essential business, which are set to run through 4 April 2020, to include mining, resulting in the temporary suspension of mining activities at our Serra Grande operations. In these countries, the suspension of mining activities will continue for the period during which the respective restrictions remain in force. Any such emergency governmental action may have a material adverse effect on the company’s operating and financial results, which may result in a negative impact on the company’s cashflows, funding requirements and overall liquidity. In addition to governmental measures, the company may also consider additional safety measures which may further the negative impacts on its operations or its exploration projects in countries that may be affected by infectious diseases, such as Ebola or COVID-19.
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 and since September 2019 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 enacted new legislation which purports to make a number of changes to the operating environment for Tanzania’s extractive industries, including its mining sector. These changes include, among other things, the right for the government of Tanzania to renegotiate existing mining development agreements at its discretion and the provision to the government of Tanzania of a non-dilutable, free-carried interest of no less than 16 percent in all mining projects. See “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine Continental Africa-Tanzania”. Any future amendments to the mining codes of the countries in which AngloGold Ashanti operates or attempts to renegotiate the company's existing mining conventions in such countries could have further adverse effects on the company’s financial condition and results of operations.
Another example were the amendments to the fiscal mining regime in Ghana introduced in 2012 by the government of Ghana which, among other things, increased the corporate taxation and royalty rates. In this regard, AngloGold Ashanti (Ghana) Limited negotiated in relation to the Obuasi mine a new development agreement (Obuasi DA) and tax concession agreement (Obuasi TCA) with the government of Ghana. As a result of the parliamentary ratification of the Obuasi DA and Obuasi TCA in June 2018, the 2004 Ghana Stability Agreement ceased to apply to the Obuasi mine but continued to apply to the Iduapriem mine until it expired in April 2019. Relevant engagements are currently ongoing between AngloGold Ashanti (Iduapriem) Limited with the government of Ghana to obtain a new stability agreement for the Iduapriem mine. See “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine-Continental Africa-Ghana”. Any future amendments to the Ghanaian mining regime, negotiation of new stability agreements, or attempts or failures to renegotiate existing stability agreements on the same favourable conditions or at all may have a material adverse effect on the company’s results of operations or financial condition.
In Brazil, for instance, as a result of the Vale tailings dams failure at Brumadinho in the state of Minas Gerais in January 2019, the Brazilian authorities have been considering, and in some cases have adopted, stricter laws and regulations applicable to the approval, licensing, construction, management, closure and decommissioning of TSFs in Brazil. For example, the federal
government is undertaking action to review relevant mining legislation and has been proposing several bills in this field, including Federal Bill No. 550 which, in its current form, among other measures, contains specific requirements in respect of the decharacterization (descaracterização) and decommissioning of TSFs, including the removal of tailings material from existing and future TSFs. The mining sector is liaising with the legislative authorities and other stakeholders in an effort to introduce amendments to this proposed bill which would mitigate some of the concerns identified by the mining industry, in particular, regarding the requirement to remove tailings material from decommissioned TSFs. See “-Mining companies are subject to extensive environmental, health and safety laws and regulations” and “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine-Americas-Brazil”. Any amendments to existing legislation in Brazil may cause a significant increase in provisions for decharacterization, decommissioning and closure, may result in additional operating or capital costs for the company and could potentially have an adverse impact on production levels at the affected operations over the next 24 months, all of which may adversely affect the company’s financial condition and results of operations.
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, the DRC, South Africa and Guinea against top political and industry leaders have increased political instability and distrust. Efforts at political and economic reforms in Brazil and such other countries may lead to increased instability. Furthermore, general elections in the countries in which AngloGold Ashanti operates may be accompanied by social, political and economic uncertainty and instability. 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.
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.
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 $196 million are owed to AngloGold Ashanti at the end of 2019 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.
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 September 2018, export duties were re-imposed by the Argentinian government set at 12 percent with a cap so that it does not exceed the amount of ARS 4 pesos per U.S. dollar exported. In September 2019, the Argentinian government re-established foreign exchange and export controls. Increased royalties, increased socio-politically tensions and hyper-inflation over the past few years have greatly increased the country risk which in turn has lowered the potential future earnings of the company's investment in Cerro Vanguardia S.A. (CVSA). Political uncertainty following the 2019 presidential elections further exacerbates the risk. The economic contraction for 2019 ended at eight percent and a further recession is expected in 2020.
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 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”.
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.
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.
In South Africa, AngloGold Ashanti’s mining rights may be suspended or cancelled by the South African Minister of Mineral Resources and Energy, and the company may be unable to obtain new mining rights if it breaches its obligations under the Mineral and Petroleum Resources Development Act, No. 28 of 2002 (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 Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2018 (Mining Charter, 2018). The Mining Charter, 2018 and its implications are discussed in more detail in “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine-South Africa”.
For example, the Mining Charter, 2018 provides that a new mining right must have a minimum of 30 percent BEE shareholding. It further provides that an existing mining right holder who has achieved a minimum of 26 percent BEE shareholding shall be recognised as compliant for the duration of the mining right. On 25 February 2019, AngloGold Ashanti received a directive from the South African Department of Mineral Resources and Energy (DMRE) stating that the company was not compliant with the amendment process required by the MPRDA in connection with BEE transactions entered into by the company after the conversion of the West Wits mining rights. The DMRE instructed AngloGold Ashanti to submit an application to amend the clauses of two of its West Wits mining rights which record the BEE transactions entered into and implemented by the company to reflect further details of those BEE transactions and provide certain information relating to such transactions. On 7 March 2019, AngloGold Ashanti submitted an application for consent of the Minister of Mineral Resources and Energy to amend those clauses accordingly and provided the requested information. As a general matter, should AngloGold Ashanti be found in breach of its obligations to comply with the MPRDA, the applicable mining charter or any future amendments to the applicable mining charter, it may be subject to adverse consequences and it may be compelled to conclude additional BEE transactions. Furthermore, in the event that AngloGold Ashanti applies for a new mining right, it will have to comply with the Mining Charter, 2018 ownership requirements and it will not be entitled to rely on its current BEE ownership structure. See also “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine-South Africa”.
AngloGold Ashanti has not yet been assessed for compliance by the DMRE against the Mining Charter, 2018 targets and it may need to make further progress to achieve future targets, including, but no limited to, further participation by historically disadvantaged South Africans, also referred to in the MPRDA as historically disadvantaged persons (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 Mining Charter, 2018 and may not meet all of the various requirements by the required dates.
In Colombia, a government agency grants exclusive concession contracts for exploration and exploitation which contain specified timelines for the completion of the various phases of a mining project. The company must comply with these timelines unless performance is suspended, for example, due to force majeure or extensions or modifications to the timelines. A grant of force
majeure is for one year and must be renewed on an annual basis. If the company does not comply with the specified timelines for the completion of the various phases of a mining project, it may be found in breach of its concession contract or mining license and such breach could constitute grounds for the mining authority to terminate such concession contract or mining license. Force majeure was declared at the La Colosa project, stopping all activities, following the outcome of the popular consultation held on 26 March 2017 in the Colombian municipality of Cajamarca in the Tolima department, which hosts the La Colosa exploration site. The force majeure has been extended multiple times and will now expire in June 2020, after which such declaration will once more need to be extended. While the company has made 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. See also “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine-Americas-Colombia”.
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.
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, 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.
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 (Cth) provides for the establishment and recognition of native title under certain circumstances. In South Africa, the Extension of Security of Tenure Act, No. 62 of 1997 and the Restitution of Land Rights Act, No. 22 of 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 Obuasi 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.
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, Tanzania, Brazil and Argentina are highly unionised and unions are active at some of the company's other operations. Trade unions working with communities and non-governmental organisations (NGOs), therefore, have a significant impact on the general labour relations environment, including labour relations at an operational level and operational stability at times. The extent of the unions’ influence also impacts the socio-economic and socio-political operating environments, most notably in South Africa, Guinea and Mali. Union involvement in wage negotiations and collective bargaining increases the risk of strike action. This situation is exacerbated by the multi-union environment at some of the company’s operations. Unions are characterized by their robust and positional engagement with the company, both in the context of existing collective bargaining structures to improve and advance conditions of employment, and in the context of changing economic conditions, downsizing and downscaling of operations. These factors expose the company’s operations to potential strike action and work stoppages. Unions are also increasingly championing broader political, economic and social issues utilizing their ability to withdraw labour. Any future labour unrest and disruptions could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.
Unions are also increasingly affiliated to Global Union Federations leveraging this influence and utilize issues such as carbon emissions, environmental issues, health and safety, human rights, job losses, unemployment and restructuring, gender and inclusion issues, and migrant labour, as rallying points. Rolling mass action, picketing, protests and community involvement may create safety, security and related risks to the company and its assets. Future disruptions, strikes, and protest actions cannot be excluded and may have a material adverse effect on the company’s results of operations and financial condition, especially if these actions have a long duration such as the recent strikes in South Africa. Furthermore, IndustriaALL, representing more than 50 million workers globally, will continue with its attempts to enter into a Global Framework Agreement with the company. A global framework agreement will expose the company to the risk of standardisation and equalisations of labour terms and conditions across the group, irrespective of the peculiar conditions applicable in the various jurisdictions in which the group operates. Any labour unrest and disruptions caused by such international trade unions 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 governmental 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.
Artisanal and illegal mining occurs on AngloGold Ashanti’s properties, which can disrupt the company’s business and expose the company to liability.
Artisanal and illegal 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. Artisanal and illegal 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 company’s operations and projects affected by artisanal and/or illegal small-scale mining are mainly situated in South Africa, Tanzania, Ghana, Mali, Guinea and Colombia.
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. In addition, illegal mining could lead to an increase in the level of organisation and funding of criminal activity around some of the company’s operations in Continental Africa. The most significant security challenges have occurred in Tanzania, Mali, Guinea and Ghana in areas where there is endemic poverty and high levels of unemployment.
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 South African 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. In addition, it has become increasingly difficult to secure work permits for AngloGold Ashanti’s expatriate workforce in Tanzania as a result of the Tanzanian government’s efforts to promote the employment of Tanzanian citizens. Difficulties in obtaining such non-citizen work permits, if continuing, may have an adverse impact on our operations in Tanzania.
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. AngloGold Ashanti’s inability to retain its senior management may have an adverse effect on the company’s business, results of operations and financial condition. In addition, 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.
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, may also have an adverse impact on the company’s results of operations and financial condition. In addition, restrictions on travel imposed by governments as a result of the outbreak of infectious diseases, a pandemic or other public health threat, such as the recent outbreak of the SARS-CoV-2 virus responsible for COVID-19, may prevent mining contractors from reaching our mining sites which could have an adverse effect on the operations of the affected mines.
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. See “Item 8A: Legal Proceedings-Ghana”.
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 2019, AngloGold Ashanti had gross borrowings of $2.033 billion (2018: $1.989 billion and 2017: $2.190 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 from operations 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 potential 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. The recent outbreak of the SARS-CoV-2 virus responsible for COVID-19, which has reached pandemic proportions, led the company to accelerate drawdowns on one of its revolving credit facilities in an aggregate amount of $1.35 billion. Any prolonged dislocation in financial markets due to the spread of the COVID-19 pandemic could impact the company’s ability to refinance its debt on commercially reasonable terms, if at all, and could as a result have a material adverse effect on the company’s funding requirements and overall liquidity.
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. S&P Global and Fitch have assigned full sub-investment grade credit ratings to the Republic of South Africa and Moody’s has assigned an investment grade rating. See “-Global economic conditions could adversely affect the profitability of operations”. Any downgrade of the company, or South Africa, 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 as well as its potential development projects 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, equity or quasi-equity 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 (including due to the recent COVID-19 pandemic) 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.
Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to our credit facilities.
LIBOR, the London interbank offered rate, is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. Some of our three revolving credit facilities bear interest rates in relation to LIBOR. On 27 July 2017, the UK Financial Conduct Authority (FCA), which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit LIBOR rates after 2021, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve. If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness may increase and we may need to renegotiate our revolving credit facilities to replace LIBOR with a new standard, both of which could have a material adverse effect on our liquidity, results of operations or financial condition. In addition, the issues that may lead to the discontinuation or unavailability of LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Further, there can be no
guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates or borrowing costs to borrowers, any of which could have a material adverse effect on our liquidity, results of operations or 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, in February 2020, the company announced the sale of its remaining South African producing assets, including the Mponeng mine. Following the classification of the South African disposal group as held for sale, an impairment of $549 million and taxation on impairment of $164 million (an impairment charge of $385 million, net of tax) was recognised to reduce the carrying amount of the assets in the South African disposal group to their fair value less costs to sell.
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. See “Item 8A: Legal Proceedings”.
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.
In Colombia, the company is also involved in class action lawsuits in relation to each of AngloGold Ashanti Colombia S.A.’s (AGAC) Santa María-Montecristo and La Colosa projects. One of these class action lawsuits led to a preliminary injunction suspending AGAC’s mining concession contracts in relation to the Santa María-Montecristo project in September 2011. See “Item 8A: Legal Proceedings-Colombia”. The company’s core mining concession contracts provide that the Colombian mining authority (ANM) has the discretion to declare the underlying concession void if AGAC repeatedly or continually breaches applicable environmental laws or regulations or engages in acts of corruption or other serious misconduct. In that event, AGAC could be required to abandon the relevant project and, depending on the severity of the violations or misconduct, the Colombian mining authority may cancel AGAC’s other existing mining concession contracts. Pending proposals for new mining concession contracts could also be cancelled and AGAC could be banned from doing business with the Colombian government for a period of five years.
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.
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 refrigeration, including 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. Ageing infrastructure may have an adverse effect on the company’s results of operations and financial condition in the future.
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 Barrick Gold Corporation (Barrick) following the completion of the merger between Randgold Resources Limited and Barrick in January 2019. In addition, certain of AngloGold Ashanti’s exploration ventures are managed by the relevant joint venture partner. For example, in January 2020, the company’s joint venture partner B2Gold Corp. assumed the role of manager of the Gramalote project in Colombia, in which AngloGold Ashanti now holds a 50 percent interest.
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 Barrick 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 Barrick 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. For example, a joint venture partner could decide to sell its shares in the joint venture in breach of any pre-emptive rights which the company may have under the relevant joint venture agreement. 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. If the costs associated with providing occupational health services, implementing dust control measures or supplying 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.
In South Africa, AngloGold Ashanti has been subject to numerous claims, including class action litigation with respect to alleged OLD with two certified industry-wide classes, i.e. a Silicosis Class and a Tuberculosis Class. The settlement agreement in relation to this silicosis and tuberculosis class action came into effect on 10 December 2019, following the approval of the settlement by the High Court in Johannesburg in July 2019. As a result, a trust (Tshiamiso Trust) has been established for a minimum of 13 years responsible for making payments to eligible beneficiaries. The amount of monetary compensation will vary depending on the nature and seriousness of the disease. As of 31 December 2019, AngloGold Ashanti has recorded a provision of $65 million (2018: $63 million and 2017: $63 million) to cover the estimated settlement costs and related expenditure of the silicosis litigation. Although significant judgement was applied in estimating the costs incurred to settle the silicosis and tuberculosis class action claim, the final costs and related expenditure may differ from current cost estimates. In addition, even though management believes the assumptions are appropriate, changes in the assumptions may materially affect the provision and final costs of settlement. For example, the final settlement costs and related expenditure may be higher than the recorded provision depending on various factors, such as, among other things, potential changes in the settlement terms, differences in the number and profile of eligible claimants actually compensated compared to current estimates and fluctuations in foreign exchange rates. There can be no assurance that ultimately this matter will not result in losses in excess of the recorded provision, which may have a material adverse effect on AngloGold Ashanti’s financial position. For further information, see “Item 8A: Legal Proceedings-South Africa” and “Item 18: Financial Statements-Note 1-Accounting Policies-Provision for silicosis”.
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 also 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 company may face additional health care challenges as a result of other public health crises, pandemics or epidemics. For example, there is a risk that the recent outbreak of the SARS-CoV-2 virus responsible for COVID-19 may significantly impair the health of our labour force. If spread among our workforce, COVID-19 may lead to a full or partial shutdown of the company’s mines in the affected areas and, as a result, a halt in related mining operations. COVID-19 also poses the risk that business may be curtailed or even suspended for an indefinite period of time due to shutdowns that may be requested or mandated by governmental authorities or otherwise elected by companies as a preventive measure to contain the spread of the virus. A curtailment or suspension at the company’s mining operations in certain or all regions due to COVID-19, either for a definite or indefinite period of time, may have a material adverse impact on our 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, in particular in South Africa. 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.
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. In South Africa, AngloGold Ashanti has identified a flooding and future pollution risk posed by deep groundwater in the Far West Rand goldfields, of which the company’s West Wits operations are part. 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. 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 reduce or maintain 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.
Sales of large quantities of AngloGold Ashanti’s ordinary shares and American Depositary 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 31.47 percent and the top 10 largest beneficially owned 46.81 percent of AngloGold Ashanti’s ordinary shares as at 31 December 2019. 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 Ghanaian cedi, the British pound 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, British pounds 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, British pound 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, British pounds, 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 had in years preceding that change. 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 (IFRS) as issued by the International Account Standards Board (IASB). 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 U.S. Securities Exchange Act of 1934, as amended (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. 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. 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 Limited 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, 2001, South Africa. The general telephone number is +27 11 637 6000 and the internet address is https://www.anglogoldashanti.com .
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). Our agent for service of process in the United States is AngloGold Ashanti North America Inc., 4601 DTC Boulevard, Suite 550, Denver, CO 80237. The U.S. Securities and Exchange Commission (SEC) maintains a public internet site that contains AngloGold Ashanti’s filings with the SEC and reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).
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.|
|•||Announcement of a review of divestment options for assets in South Africa, Mali and Argentina.|
|•||Sale of the Sadiola mine in Mali for $52.5million.|
|•||Announcement of the sale of the remaining South African producing assets and related liabilities.|
CAPITAL EXPENDITURE AND DIVESTITURES
For information concerning the company’s principal capital expenditures currently in progress, including the distribution of these investments geographically and the method of financing, refer to “Item 4B: Business Overview -AngloGold Ashanti Global Operations: 2019”, “Item 5A: Operating Results-Capital expenditure” and “Item 5B: Liquidity and Capital Resources”.
For information concerning the company’s divestitures currently in progress, including the sale of the remaining South African producing assets and related liabilities announced on 12 February 2020, refer to “Item 5A: Operating Results-Subsequent events”, “Item 18: Financial Statements-Note 37-Subsequent events” and “Item 18: Financial Statements-Note 9-Discontinued operations and assets and liabilities held for sale”.
AngloGold Ashanti, an independent global gold mining company with a diverse, high-quality portfolio of operations, projects and exploration activities across 11 countries on four continents. The Company is headquartered in Johannesburg, South Africa. Measured by production, AngloGold Ashanti is the third largest gold mining company in the world.
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 and sulphuric acid in Brazil.
Our portfolio of 14 operations and three projects in nine countries, excluding our South African assets and Sadiola mine which are held for sale, comprises long-life, operating assets with differing ore body types, located in key gold-producing regions around the world.
Our operations and projects are grouped regionally as follows:
|•||South Africa (West Wits and Surface Operations);|
|•||Continental Africa (Democratic Republic of the Congo, Ghana, Guinea, Mali and Tanzania);|
|•||Americas (Argentina and Brazil, and projects in Colombia); and|
Over the past few years, AngloGold Ashanti has transformed itself by increasing efficiencies and competitiveness, focusing on safety and sustainability performance, improving margins, containing operating and overhead costs and generating positive cash flows and reducing its footprint in South Africa, in line with our strategic objectives.
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 focused on creating significant value for the company's stakeholders by providing long-term optionality and improving the quality of our asset portfolio.
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.
GOLD MARKET AND JEWELLERY DEMAND
During 2019, the gold market was notably active with retail investors capitalising on the higher prices by selling their existing holdings. In contrast, professional investors increased their holdings on the COMEX gold futures market, which reached all-time highs equivalent to 1,134 tonnes, and of Exchange Traded Funds (ETFs). Physically-backed ETFs and similar products closed 2019 at 2,885.5 tonnes with annual inflows of 401.1 tonnes, up 426% year-on-year.
In the fourth quarter of 2019, central banks added a net 109.6 tonnes to global official gold reserves bringing full-year net purchases to 650.3 tonnes, 1% lower than the 2018 total of 656.2 tonnes. This marks ten consecutive years of net purchases, with global official reserves now 5,000 tonnes higher than at the end of 2009 at close to 34,700 tonnes, and highlights the importance central banks place on having an allocation of gold in their reserve portfolio.
In 2019, global gold jewellery demand volumes fell 6 percent to 2,107 tonnes. Purely a second half of the year phenomenon, the weakness was primarily due to the big jump in the third quarter in the price of gold (in local currency terms), which impacted affordability. The price was well supported at elevated levels throughout the closing months of 2019, leading to a 10 percent year on year drop in the fourth quarter demand to 584.5 tonnes. In US dollar terms, gold jewellery demand grew by 3 percent to a five-year high of $94.3 billion. Much of this came from a 9 percent year on year increase in the fourth quarter demand, which reached
$27.8 billion, a seven-year high. Technology demand for gold weakened contributing to a 2 percent fall in demand for gold in the sector.
Total supply was slightly higher in 2019, up two percent year on year from 4,673.0 tonnes in 2018 to 4,776.1 tonnes in 2019. This growth was attributable to the price performance of gold over the year, primarily through its impact on recycling, but also on net hedging to a certain extent. While mine production fell by 1 percent year on year, a sharp increase in gold recycling to its highest level since 2012 (up 11 percent year on year) helped boost higher total supply. Modest net producer hedging, the first year of net hedging since 2016, also contributed to overall supply.
The average gold price for the year was $1,394/oz (2018: US$1,268/oz). AngloGold Ashanti achieved an average price of $1,387/oz for gold sold during the year, a 10% increase over 2018 at $1,261/oz.
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 to “Item 18: Financial Statements-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, commercial or financial contracts or new manufacturing processes 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”.
General laws relating to mining
The Mineral and Petroleum Resources Development Act
Mineral and Petroleum Resources Development Act
The Mineral and Petroleum Resources Development Act, No. 28 of 2002 (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.
Mineral and Petroleum Resources Development Amendment Act
The Mineral and Petroleum Resources Development Amendment Act, No. 49 of 2008 (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 and Energy (MRE Minister) the responsible authority for implementing the requirements of the National Environmental Management Act, No. 107 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 MRE 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 MRE 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 MRE 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 MRE Minister issues a closure certificate.
Draft Mineral and Petroleum Resources Development Bill & Draft Upstream Petroleum Resources Development Bill
In 2012, the MRE Minister published the Draft Mineral and Petroleum Resources Development Bill, 2012 (2012 MPRDA Bill) and, in 2013, a revised version of the 2012 MPRDA Bill (2013 MPRDA Bill) was submitted to Parliament. Following several amendments, the 2013 MPRDA Bill was eventually withdrawn by the South African government in September 2018.
On 24 December 2019, the MRE Minister published the Draft Upstream Petroleum Resources Development Bill, 2019 for public comment. This new bill provides for the upstream petroleum industry to be governed under a separate piece of legislation which does not come under the umbrella of the MPRDA. At this stage it is unclear whether the MRE Minister will submit a new bill in respect of the mineral resources industry proposing any of the amendments originally contained in the withdrawn 2013 MPRDA Bill.
Mineral and Petroleum Resources Development Regulations
On 23 April 2004, the MRE Minister published under the terms of the MPRDA the Mineral and Petroleum Resources Development Regulations in Government Gazette No. 26275 under GNR. 527 (MPRDA Regulations). On 28 November 2019, the MRE Minister published, for public comment, the Draft Amendments to the Mineral and Petroleum Resources Development Regulations, 2019 (Draft MPRDA Regulations). Interested and affected parties were invited to submit written representations to the Draft MPRDA Regulations within 30 days of the publication thereof. The proposed amendments contained in the Draft MPRDA Regulations, include, inter alia, the following:
“Interested and affected parties”: Section 10 of the MPRDA requires consultation of interested and affected parties. The MPRDA Regulations currently define “interested and affected parties” as “a natural or juristic person with a direct interest in the proposed or existing operation or who may be affected by the proposed or existing operation”. The Draft MPRDA Regulations expand on the aforesaid definition by specifying that these include but are not limited to “host communities, landowners (traditional and title deed owners); traditional authority; land claimants; lawful land occupier; holder of informal land rights; the Department of Agriculture, Land Reform and Rural Development; any other person (including on adjacent and non-adjacent properties) whose socio-economic conditions may be directly affected by the proposed prospecting or mining operation; the local municipality and the relevant Government Departments, agencies and institutions responsible for the various aspects of the environment and for infrastructure which may be affected by the proposed project”;
“Meaningful consultation”: Meaningful consultation envisages a consultation process where “the applicant, has in good faith engaged the landowner, lawful occupier or interested and affected party in respect of the land subject to the application about the impact the prospecting or mining activities would have to his right of use of the land by availing all the information pertaining to the proposed activities enabling these parties to make an informed decision regarding the impact of the proposed activities”;
Information requirement: A new requirement is introduced requiring a mining company to provide certified copies of its right or permit in question, environmental authorisation and any relevant authorisations to landowners and lawful occupiers before commencing with operations;
Social and Labour Plans: A new requirement is introduced obliging mining companies to publish Social and Labour Plans (SLP) relating to their operations in English and one other dominant official language commonly used in the mine community on the mining company’s website, in local newspaper(s), as hard copies in local libraries, municipal offices, traditional authority offices and company/mine offices within 30 days of approval. Furthermore, the availability and content of the approved SLP must be announced, where feasible, in local radio stations and in relevant news outlets;
Repeal: Regulations 47-55 and 58-60 of the MPRDA Regulations are repealed as the topics governed by these regulations have since been incorporated into NEMA and the Environmental Impact Assessment Regulations, 2014 (as amended);
Disputes: A process is prescribed according to which the Regional Manager may resolve land access and “resettlement” disputes in terms of section 54 of the MPRDA . A procedure is also created for resolving land disputes which gives the MRE Minister or the Director-General certain powers to deal with complicated land disputes; and
Appeals: New procedures are proposed for lodging internal appeals in terms of section 96 of the MPRDA.
The Mining Charter
Mining Charter, 2004
The Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry, 2004 (Mining Charter, 2004) was published in August 2004. The Mining Charter, 2004 was developed in terms of section 100(2)(a) of the MPRDA and took effect on 1 May 2004. The Mining Charter, 2004 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 Mining Charter, 2004 also set 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 formulate plans to achieve the aforementioned targets, identify current levels of beneficiation and indicate opportunities for growth.
The objectives of the Mining Charter, 2004 were 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, 2004 envisaged 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, 2004, the mining industry agreed to assist HDSA companies in securing finance to fund participation in an amount of ZAR 100 billion over the first five years of the Mining Charter, 2004 being in effect. 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.
Mining Charter, 2010
Following a review of the progress made in the transformation of the mining industry against the Mining Charter, 2004 objectives, the DMRE amended the Mining Charter, 2004. The Amendment of the Broad-Based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2010 (Mining Charter, 2010) was published on 20 September 2010. The Mining Charter, 2010 retained the requirement to achieve a 26 percent HDSA ownership of mining assets by the year 2014, initially introduced under the Mining Charter, 2004. It also introduced further amendments to the Mining Charter, 2004 which required 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 + one vote of share capital is owned by HDSAs) by 2014. The aforesaid procurement targets are, 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 (effective 2010) to contribute to the socio-economic 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 positions requiring core and critical skills, middle management level and junior management level;|
|•||invest up to 5 percent of annual payroll in essential skills development activities; and|
|•||implement measures to improve the standards of housing and living conditions of 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, by 30 April 2014.|
In addition, mining companies were required to monitor and evaluate their compliance with the Mining Charter, 2010 and submit annual compliance reports to the DMRE.
The South African government takes a “Scorecard” approach to the different facets of promoting the objectives of the Mining Charter, 2010, e.g. when considering applications for the conversion of existing old order rights into new order rights. The Scorecard sets out the requirements of the Mining Charter, 2010 in tabular form which allows the DMRE to “tick off” areas where a mining company is in compliance, such as: human resource development; employment equity; migrant labour; mine community and rural development; housing and living conditions; ownership and joint ventures; beneficiation; and reporting.
The Scorecard attached to the Mining Charter, 2010 made provision for a phased-in approach for compliance with the view of achieving the abovementioned targets over a 5-year period ended on 30 April 2014. For measurement purposes, the Scorecard allocated various weightings to the different elements of the Mining Charter, 2010.
Failure to comply with the provisions of the Mining Charter, 2010 amounted to a contravention of the MPRDA, which may have resulted in the cancellation or suspension of a mining company’s existing mining rights and prevented its South African operations from obtaining any new mining rights. To date, AngloGold Ashanti has not yet received its “Scorecard” from the South African government in order to assess its compliance with the requirements of the Mining Charter, 2010.
In March 2015, the MRE Minister announced that the DMRE and the Minerals Council South Africa (Minerals Council) had agreed to submit certain matters relating to the interpretation of the Mining Charter, 2010 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 Minerals Council and the DMRE, 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, 2004 and the Mining Charter, 2010 requesting that the Charters be set aside. This application was dismissed.
On 9 March 2016, AngloGold Ashanti received a notice from the DMRE 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 negatively impact AGA’s “Scorecard” assessment. On 14 March 2016, AngloGold Ashanti timely responded to the non-compliance notice. The DMRE provided no further response and, consequentially, the notice has lapsed.
Mining Charter, 2017
On 15 June 2017, the MRE Minister gazetted the Broad-Based Black Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, 2017 (Mining Charter, 2017), which came into effect on the same day. The Mining Charter, 2017 sought to align the Mining Charter, 2010 with the Broad-Based Black Economic Empowerment Act, No. 53 of 2003, in order to ensure meaningful participation of black people in the mining industry and to provide for policy and regulatory certainty to ease the investment in and development of the mining industry. The Minerals Council launched an urgent application to interdict the implementation of the Mining Charter, 2017 and set it aside. The DMRE filed papers in court and the urgent application was due to be heard in court on 14 September 2017. Notwithstanding the aforesaid urgent application in court, the MRE Minister and the Minerals Council reached an agreement on 13 September 2017 wherein the MRE Minister undertook to suspend the Mining Charter, 2017 pending the outcome of the DMRE/Minerals Council application.
The DMRE/Minerals Council application was heard on 9 and 10 November 2017 and judgment was handed down on 4 April 2018. The High Court of South Africa held that:
Once the MRE Minister or his delegate is satisfied in terms of section 23(1)(h) of the MPRDA that the grant of a mining right (applied for in terms of section 22 of the MPRDA) will further the objects referred to in section 2(d) and (f) of the MPRDA (in accordance with the Charter referred to in section 100) and has granted the mining right applied for, the holder thereof is not thereafter legally obliged to restore the percentage ownership (howsoever measured, inter alia, wholly or partially by attributable units of South African production) controlled by HDSAs to the 26 percent target referred to in the Mining Charter, 2004 and the Mining Charter, 2010 , where such percentage falls below 26 percent, unless such obligation is specified in the terms and conditions of the mining right, as referred to in section 23(6) of the MPRDA;
|•||The holder of a mining right’s failure to meet the 26 percent ownership target (either in terms of the Mining Charter, 2004 or the Mining Charter, 2010) does not amount to a material breach of the mining right for the purposes of section 47 of the MPRDA (i.e. failure to meet the 26 percent HDSA ownership target will not be a ground for suspension or cancellation of the mining right) nor does it constitute an offence in terms of section 98 of the MPRDA. This, however, does not apply where the terms and conditions of the right itself have stipulated that the 26 percent HDSA ownership must be retained;|
|•||If the 26 percent HDSA ownership participation has, for any reason, been diluted to a lesser percentage, there is no obligation to rectify such lower level once the holder of the mining right has initially achieved the 26 percent HDSA ownership participation requirement. This does not apply where the terms and conditions of the right itself have stipulated that the 26 percent HDSA ownership must be retained;|
|•||The Mining Charter, 2010 does not retrospectively deprive holders of mining rights of the benefits of credit offsets; the continuing consequences of empowerment transactions concluded after the MPRDA came into effect; and the right to off-set credits achieved in one operation against any shortfalls encountered in another operation; and|
|•||While it did not make any pronouncements on the validity of the Mining Charter, 2010, this should not be taken as a confirmation that the Mining Charter, 2010 was validly issued in terms of section 100(2) of the MPRDA or that “it is the charter contemplated in section 100” of the MPRDA.|
On 19 April 2018, the DMRE filed a notice of intention to appeal the High Court judgment. Such notice was granted on 19 September 2019 entitling the DMRE to file an appeal at the Supreme Court of Appeal. Notwithstanding the repeal of the Mining Charter, 2017 by the adoption of the Mining Charter, 2018 (defined below), the findings of the High Court judgment remain relevant to mining right holders and these findings will be the subject of the pending appeal before the Supreme Court of Appeal which has not yet been progressed.
Mining Charter, 2018
On 27 September 2018, the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (Mining Charter, 2018) was published and became effective on the same date. The Mining Charter, 2018 repeals the Mining Charter, 2004; the Mining Charter, 2010; and the Mining Charter, 2017. The Mining Charter, 2018 stipulates that it is to be read together with implementation guidelines, gazetted on 19 December 2018. On 26 March 2019, the Minerals Council filed an application for judicial review to set aside certain provisions of the Mining Charter, 2018. It is not clear when the matter will be heard in court.
Some of the key provisions of the Mining Charter, 2018 include:
|•||Existing mining right holders who have achieved the 26 percent HDSA ownership target shall be recognized as compliant for the duration of the mining right. However, the “the once empowered always empowered” principle shall not be applicable on the transfer or renewal of the mining right.;|
|•||An application, which was lodged and accepted prior to the commencement of the Mining Charter, 2018 shall be processed in terms of the Mining Charter, 2010 with a minimum of 26 percent HDSA ownership. The right holder must within a period of five years from the effective date of such mining right, increase its HDSA ownership to a minimum of 30 percent;|
|•||A new mining right must have a minimum of 30 percent HDSA ownership, which shall include economic interest plus corresponding percentage of voting rights per mining right or in the mining company which holds a mining right. The 30 percent HDSA ownership must be distributed as follows:|
|•||a minimum of 5 percent non-transferable carried interest to qualifying employees;|
|•||a minimum of 5 percent non-transferable carried interest or “equity equivalent benefit” to host communities; and|
|•||a minimum of 20 percent effective ownership in the form of shares to a BEE entrepreneur, 5 percent of which must preferably be for women;|
|•||The Mining Charter, 2018 reduced the offset available for beneficiation from 11 percent to 5 percent, but on the basis that existing mining right holders, who qualified for the previous offset, would be allowed to retain it for the duration of the right. Right holders must submit a Beneficiation Equity Equivalent Plan (as outlined in implementation guidelines) to the DMRE for approval. Further, mining right holders must submit an annual progress report to the DMRE, which report must be in line with the approved Beneficiation Equity Equivalent Plan;|
Mining companies must have Historically Disadvantaged Persons (as defined in the MPRDA) representation at various levels of the company, i.e. board 50 percent (20 percent women); executive management 50 percent (20 percent women); senior management 60 percent (25 percent women); middle management 60 percent (25 percent women); junior management 70 percent (30 percent women) and a minimum 1.5 percent of all employees must be employees with disabilities. A period of five years is provided for mining companies to align with the employment equity targets and a 5-year plan indicating progressive implementation of the provisions of the employment equity targets must be submitted to the DMRE within 6 months of the publication of the Mining Charter, 2018;
|•||New procurement targets have been introduced. 70 percent of total mining goods procurement spend must be on South African manufactured goods. South African manufactured goods are defined as goods with a minimum of 60 percent local content during the assembly or manufacturing of the product in South Africa. The calculation of local content excludes profit mark-up, intangible value such as brand value and overheads. A minimum of 80 percent of the total spend on services must be sourced from South African companies. The transitional arrangement period for compliance with the procurement targets is five years from the publication of the Mining Charter, 2018; and|
|•||The Mining Charter, 2018 provides for the specific application of certain of the elements of the Mining Charter, 2018 to holders of licences under the Precious Metals Act, No. 37 of 2005 and the Diamonds Act, No. 56 of 1986 with variations and exemptions depending on the size of the licence holder. For example, enterprises with a turnover of less than ZAR 1 million are exempt from the Mining Charter, 2018 in its entirety. Enterprises with a turnover of more than ZAR 50 million must comply with the Mining Charter, 2018 in its entirety.|
On 25 February 2019, AngloGold Ashanti received a directive from the DMRE stating that the company was not compliant with the amendment process required by the MPRDA in connection with BEE transactions entered into by the company after the conversion of the West Wits mining rights. The DMRE instructed AngloGold Ashanti to submit an application to amend the clauses of two of its West Wits mining rights which record the BEE transactions entered into and implemented by the company to reflect further details of those BEE transactions and provide certain information relating to such transactions. On 7 March 2019, AngloGold Ashanti
submitted an application for consent of the MRE Minister to amend the clauses of the two West Wits mining rights which record the BEE transactions entered into and implemented by the company accordingly and provided the requested information. The DMRE has not reverted to AngloGold Ashanti on the submitted application which remains pending. Should AngloGold Ashanti be found in breach of its obligations to comply with the MPRDA or the applicable mining charter, it may be compelled to conclude additional BEE transactions. In the event that AngloGold Ashanti applies for a new mining right, it will have to comply with the Mining Charter, 2018 ownership requirements and it will not be entitled to rely on its current BEE ownership structure.
The Code of Good Practice for the Minerals Industry
Section 100(1)(b) of the MPRDA obliged the MRE Minister to develop a code of good practice for the South African minerals industry (Code) which was published on 29 April 2009. The Code is a guiding document and its purpose is to set out administrative principles to enhance implementation of the Mining Charter, 2004 (including later iterations thereof) and the MPRDA. The Code is to be read in combination with the Mining Charter, 2004 (including later iterations thereof) and other legislation relating to measurement of socio-economic transformation in the South African mining industry. The Code does not replace the Mining Charter, 2004 (including later iterations thereof), 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 Mining Charter, 2004 (including later iterations thereof).
The Housing and Living Conditions Standard
On 20 March 2019, the MRE Minister published the draft Reviewed Housing and Living Conditions Standard for the Minerals Industry, 2019 (Draft Reviewed Housing Standard) in the Government Gazette No. 42326 under GNR. 449 inviting interested and affected parties to submit written representations on the draft within 30 days of the publication of the notice. The Draft Reviewed Housing Standard proposes, among other things, that:
|•||An existing mining right holder must within a period of 6 months from the date of publication of the Draft Reviewed Housing Standard submit a detailed Housing and Living Conditions Plan;|
|•||A new mining right holder must within a period of 12 months from the date of publication of the Draft Reviewed Housing Standard consult with organized labour, the relevant municipality and the Department of Human Settlements and enter into a housing and living conditions agreement with organized labour regarding its mine employee housing and living conditions needs;|
|•||A mining right holder will be required after consultation with other stakeholders to acquire land within close proximity of the mine operations and plan housing needs in support of compact, integrated and mixed land use environment; and|
|•||A mining right holder must offer employees a range of housing options which include, amongst other things, rental accommodation, home ownership, government led social housing and living out allowance.|
Draft Mine Community Resettlement Guidelines
On 4 December 2019, the MRE Minister published the Draft Mine Community Resettlement Guidelines, 2019 (Draft Resettlement Guidelines) for public comment in the Government Gazette No. 42884 under GNR. 1566. The closing date for submission of written representations was 31 January 2020. Some of the key provisions of the Draft Guidelines include the following:
|•||The Draft Resettlement Guidelines apply to both applicants (Applicants) and existing holders (Holders) of mining rights, prospecting rights and mining permits in terms of the MPRDA where prospecting or mining activities will have the effect of displacement or resettlement of the interested and affected parties (as defined in the Draft Resettlement Guidelines meaning any person, group of persons, or organization interested in or affected by a resettlement activity and any organ of state that may have jurisdiction over any aspect of the resettlement activity);|
|•||Applicants and Holders are required to make provision for development of a Resettlement Plan, Resettlement Action Plan and Resettlement Agreement; and|
|•||No mining activity shall commence until a Resettlement Agreement is reached on the appropriate amount of compensation as a result of the resettlement of the affected parties. An Applicant/Holder, where feasible, must provide financial assistance to affected parties. A “Party to Party dispute resolution process” must be invoked prior to embarking on the Regional Manager-led process in section 54 of the MPRDA.|
The BBBEE Amendment Act
On 23 January 2014, the President of South Africa assented to the Broad-Based Black Economic Empowerment Amendment Act, No. 46 of 2013 (BBBEE Amendment Act). The BBBEE Amendment Act came into effect on 24 October 2014 with the object of amending the Broad-Based Black Economic Empowerment, 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 BBBEE 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 the definition of “fronting BBBEE practices” (i.e. a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of the BBBEE Act or the implementation of any of its provisions), which to date has been developed outside of the BBBEE Act and has now been expanded:|
|•||to capture 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 No. 39350, which declared an exemption in favour of the DMRE 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 1 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, none of the mining charters referred to above (i.e. Mining Charter, 2004; Mining Charter, 2010; Mining Charter, 2017 or Mining Charter, 2018) are Sector Codes. It is not, at this stage, clear what the interplay between the applicable mining charter and the BBBEE Act and Revised BEE Codes is. The government could designate the applicable mining charter as a Sector Code in the future, in which case it would be under the auspices of the BBBEE Act, but it has not chosen to do so with respect to the Mining Charter, 2010 in its Government Gazette notice of 17 February 2016 which designated, for example, the tourism sector code and property sector code as applicable and valid Sector Codes. Until such determination is made, if at all, the applicable mining charter remains a stand-alone document under the auspices of the MPRDA and may become subject to the trumping provision discussed above. The resulting legal uncertainty could be addressed by a clarification from the government or by the matter receiving judicial attention.
Historically, there has been some debate as to whether the BBBEE Act and the BBBEE Codes apply to the mining industry, taking into account that the BBBEE Act requires every organ of state and public entity to give due consideration to the BBBEE Codes when issuing licenses, concession or other authorisations.
While the MPRDA and the BBBEE Act have an overlapping focus, the BBBEE Act and the Revised BEE Codes do not require the DMRE to apply the Revised BEE Codes when determining the qualification criteria for the issuing of mining rights, nor do they require that the DMRE apply the Revised BEE Codes as a requirement for the retention of existing mining rights. The Revised BEE Codes will nevertheless apply to mining companies if they wish to be scored for the purpose of contracting with organs of state.
Constitutional Amendment Bill
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. 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. In its report dated 15 November 2018, which was adopted by Parliament on 4 December 2018, the CRC recommended that section 25 of the Constitution be amended to make explicit that expropriation of land without compensation is a legitimate option for land reform. As a result, the draft Constitution Eighteenth Amendment Bill, 2019 (Constitutional Amendment Bill) was published for public comment on 6 December 2019. The Constitutional Amendment Bill proposes that where land and any improvements thereon are expropriated for the purposes of land reform, nil compensation may be payable. The Constitutional Amendment Bill does not specify the circumstances in which a court may determine that the amount of compensation is nil, but states that national legislation must set out such circumstances.
Draft Expropriation Bill
Separately, the Draft Expropriation Bill, 2019 (Expropriation Bill) was published for public comment on 21 December 2018. The Expropriation Bill proposed the inclusion of a provision in the Constitution to the effect that it may be just and equitable for nil compensation to be paid where land is expropriated in the public interest. The Expropriation Bill has not been progressed.
Section 5(3) of 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. The DMRE may, in terms of section 54(3) of the MPRDA, request the parties concerned to endeavour to reach an agreement for the payment of compensation for loss or damage if the DMRE concludes that the landowner has suffered or is likely to suffer loss or damage as a result of the mining operations. Section 55 of the MPRDA further provides the MRE Minister with powers to expropriate the land in question for purposes of mining.
Tax laws relating to mining
The Royalty Act
The Mineral and Petroleum Resources Royalty Act, No. 28 of 2008 (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 (EBIT) as determined by the Royalty Act, 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 5 percent of gross 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 gross revenue was introduced for unrefined minerals. Where unrefined minerals (such as uranium) constitute less than 10 percent in value of the total composite minerals, the royalty rate in respect of refined minerals may be used for all gross revenue and a separate calculation of EBIT for each class of minerals is not required. For AngloGold Ashanti, this means that currently the company will pay a royalty based on refined minerals (as the unrefined minerals (such as uranium) for AngloGold Ashanti for 2019 constituted less than 10 percent in value of the total composite minerals). The rate of royalty tax payable for 2019 was 0.5 percent of gross revenue of the company’s South African operations.
In 2013, the President appointed the Davis Tax Committee to review the current mining tax regime. In the Second and Final Report on Hard Rock Mining released in November 2017, the Davis Tax Committee recommended an update and refinement of the schedules in the Royalty Act, suggesting it should form part of regulations made by the Minister of Finance in the Government Gazette rather than forming part of the legislation itself. The Davis Tax Committee called upon the South African Revenue Service (SARS) to issue a comprehensive interpretation notice on the Royalty Act to dispel industry uncertainty.
Some of the other preliminary recommendations of the Davis Tax 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 Davis Tax 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 Davis Tax 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.
Environmental laws relating to mining
National Environmental Management Act
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 environmental regulation provisions from the MPRDA into National Environmental Management Act, No. 107 of 1998 (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, No. 25 of 2014, and now includes provisions to deal with environmental regulation of mining and prospecting which provisions are administered by the MRE Minister.
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”.
Financial Provision Regulations
On 20 November 2015, the Regulations Pertaining to the Financial Provision for Prospecting, Exploration, Mining or Production Operations were published in the Government Gazette No. 39425 under GNR. 1147 (Financial Provision Regulations, 2015), and now fall under NEMA. The Financial Provision Regulations, 2015 are similar to the previous provisions under the MPRDA. However, the mining industry believes some of the significant changes introduced by the Financial Provision Regulations, 2015 include:
|•||broader definition of “financial provision” requires the holder to make financial provisions for any adverse impacts that might arise from mining operations and is not limited to those identified in the environmental management plan (EMP), as was previously the case;|
|•||requiring the holder to annually assess environmental liability estimates and adjust the financial provision to the satisfaction of the MRE Minister;|
|•||requiring the holder to submit an audit report from an independent auditor to the MRE Minister on the adequacy of the holder’s financial provision. If the MRE Minister is not satisfied with the assessment, he is entitled to appoint his own auditor;|
|•||requiring that a holder maintain and retain a financial provision following the issuance of a closure certificate. Furthermore, the MRE 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 excess 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 into 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 for the same using one or a mix of four methods:|
|•||depositing cash in to the DMRE bank account;|
|•||keeping the amount in a rehabilitation trust in accordance with the Income Tax Act, No. 58 of 1962 (the amount in the trust can only relate to financial provision for post-closure residual impacts and water pumping and not for annual and final closure);|
|•||obtaining a financial guarantee or a bank guarantee in respect of the amount; or|
|•||using a method determined by the Director-General (uncommon in practice).|
|•||a holder’s financial provision at any given time must be equal to the sum of actual costs of implementing all three broad classes of rehabilitation for at least 10 years from such date of assessment of financial provision; and|
|•||the financial provision liability associated with annual rehabilitation, final closure and latent or residual environmental impacts may not be discounted based on value of the assets at mine closure or mine infrastructure salvage value.|
Failure to align to the Financial Provision Regulations, 2015 constitutes non-compliance with section 24P of NEMA, which entitles the DMRE to issue a directive to remedy such non-compliance 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 ZAR 10 million and/or to imprisonment for a period not exceeding 10 years.
The mining industry has raised concerns with the Financial Provision Regulations, 2015, in particular with respect to: confusion regarding the applicability of the Financial Provision Regulations, 2015 to applicants and to previous rights 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 three plans; over-auditing, time and cost implications; and inclusion of care and maintenance.
On 21 September 2018, the Acting Minister of Environmental Affairs published a series of amendments to the Financial Provision Regulations, 2015 which included, among other things, the repeal of prior amendments and the extension of the deadline for compliance to 19 February 2020.
On 17 January 2020, the Minister of Environment, Forestry and Fisheries published another amendment to the Financial Provision Regulations, 2015. This amendment extended the transitional period for certain existing rights and permit holders until 19 June 2021.
Proposed Financial Provision Regulations
In May 2019, the South African Proposed Regulations Pertaining to the Financial Provision for the Rehabilitation and Remediation of Environmental Damage caused by Reconnaissance, Prospecting, Exploration, Mining or Production Operations, 2019 (Proposed Financial Provision Regulations, 2019) were released for public comment.
The Proposed Financial Provision Regulations, 2019 provide that holders of prospecting rights and mining rights or permits, who applied for the right or permit prior to 20 November 2015, will be required to comply with the new regulations no later than three months following the first financial year end of the relevant holder subsequent to 19 February 2020. Some of the key features of the Proposed Financial Provision Regulations, 2019 and the concerns raised during the commenting process by mining companies are the following:
|•||Regulation 7(3) provides that “funds set aside for financial provision must remain in place until a closure certificate is issued, unless a withdrawal as contemplated in regulation 11 is allowed”. Regulation 11 outlines the procedure for holders to follow when seeking to withdraw financial provision and provides that the MRE Minister must approve withdrawals with the concurrence of the Minister of Human Settlements, Water and Sanitation and the Minister of Finance. The withdrawal of financial provision can only occur after the stringent requirements stipulated in regulation 11 are met and are only allowed for decommissioning and final closure and not for ongoing or concurrent rehabilitation. Since the financial provision is not accessible to the holder for use during the life of the right, the holder has to effectively make double provision (the first being financial provision and the second being actual expenditure incurred for rehabilitation). The implications of regulation 7(3), read with regulation 11, may include a rise in the amount of financial guarantees provided in connection with mining operations;|
|•||Regulation 12(2) prescribes that the determination, review and assessment of financial provision must be undertaken by a specialist which must be audited by an independent auditor as provided for in regulation 13(1)(a) and submitted for approval to the MRE Minister. This requirement places a significant administrative and cost burden on the mining industry; and|
Value-added tax (VAT) is included in the financial provision calculation. This inclusion is seen as onerous by the mining industry.
AngloGold Ashanti’s rights and permits
Under South African law, a mining right will be granted to a successful applicant for a period not exceeding 30 years. Thereafter, 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 the production rate undertaken by the mining right holder in the approved mining work programme. 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. In addition, a retention period of up to three years after prospecting could be allowed under certain circumstances, which may be renewed once for up to two years, subject to certain conditions. Refining licences are granted by the South African Diamond and Precious Metals Regulator for a period not exceeding 30 years and may be renewed for an unlimited number of further periods.
AngloGold Ashanti currently holds three mining rights in South Africa. These mining rights relate to operations in the West Wits area and have been successfully converted, executed and registered as new order mining rights at the Mineral and Petroleum Titles Registration Office (MPTRO). Mining right GP 30/5/1/2/2/01 MR (DMRE reference) in respect of gold, silver, nickel and uranium covers an area of approximately 6,477 hectares and expires in 2036. Mining right GP 30/5/1/2/2/11 MR (DMRE reference) in respect of gold, silver, nickel and uranium covering an area of approximately 31 hectares expired in 2016 and the company is currently in the process of renewing this mining right following a timely submission of a renewal application. Mining right GP 30/5/1/2/2/248 MR (DMRE reference) in respect of sand covers an area of approximately 196 hectares and expires in 2022. AngloGold Ashanti currently does not hold any prospecting rights in South Africa.
AngloGold Ashanti also held a mining permit for the recovery of sand and clay in the West Wits area. Mining permit GP 30/5/1/2/2/174 MP (DMRE reference) in respect of sand and clay expired in 2017 and the company is currently in the process of renewing this mining permit following a timely submission of a renewal application.
AngloGold Ashanti submitted an application in terms of section 102 of the MPRDA in March 2017 to consolidate the company’s three mining rights and its mining permit in South Africa into one single mining right (GP 30/5/1/2/2/01 MR) (Consolidation Application). The Consolidation Application requested the DMRE to suspend the renewal applications for mining right GP 30/5/1/2/2/11 MR and mining permit GP 30/5/1/2/2/174 MP in order to process the Consolidation Application. The DMRE acknowledged the Consolidation Application in July 2018 and is currently considering the Consolidation Application.
In addition, AngloGold Ashanti holds a refining licence (AP06789) relating to the Vaal River area expiring in 2039.
Democratic Republic of the Congo (DRC)
General laws relating to mining
The mining industry in the DRC is primarily regulated by law No. 007/2002 dated 11 July 2002 (2002 DRC Code) as amended by law No. 18/001 dated 29 January 2018 (Reformed DRC Mining Code) and decree No. 038/2003 dated 26 March 2003 as amended by decree No. 18/024 dated 8 June 2018 (Reformed DRC Mining Regulations).
As regards the application of the Reformed DRC Mining Code and Reformed DRC Mining Regulations, Kibali Goldmines SA (Kibali) has reserved and continues reserving its rights, including, without limitation, its stability rights under, among other legal sources,
the 2002 DRC Code. Discussions with the DRC government on these issues and the possible application of incentives that may be available under the Reformed DRC Mining Code and Reformed DRC Mining Regulations are ongoing.
In accordance with prior mining legislation, companies holding mining titles issued prior to the entry into force of the Reformed DRC Mining Code and Reformed DRC Mining Regulations have claims to a 10-year stability provision. Notwithstanding the adoption of the new regulatory regime, their rights with respect to such stability provision are reserved.
The Reformed DRC Mining Code grants the DRC Minister of Mines the authority to grant, refuse, suspend and terminate mineral rights, subject to conditions set out in the Reformed DRC 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 permit 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 other things, 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 DRC Mining Code provides, depending on the nature of a dispute or threat, administrative, judicial and national or international arbitral recourses.
Tax laws relating to mining
The Reformed DRC Mining Code sets out an exclusive and exhaustive tax and customs regime applicable to mining activities. Mining title holders are subject, amongst other things, to a corporate income tax of 30 percent, a windfall tax of 50 percent and are required to pay mining royalties to the DRC government. The royalty rate applicable to gold has been set at 3.5 percent. Mining title holders are also required to contribute a minimum of 0.3 percent of total turnover to community development. The standard rate of VAT is 16 percent and is applicable to all mining companies.
Mining companies are required to grant a free-carried and non-contributory participation to the DRC government. The DRC government’s free participation was previously set at 5 percent but was increased to 10 percent in respect to mining titles issued after the entry into force of the Reformed DRC Mining Code. All mining companies are required to grant an additional 5 percent free-carried participation to the DRC government upon each renewal of their exploitation permit. Under the Reformed DRC Mining Code, a 10 percent local contributory participation is also mandatory for mining titles issued after its entry into force.
Regarding exchange control rules, the Reformed DRC Mining Code requires that mining title holders repatriate onshore 60 percent of sale revenues during the investment amortization period and 100 percent once the investment amortization is completed.
The Reformed DRC Mining Code also provides for a level of fiscal stability. A stability clause stipulates that existing tax, customs and exchange control provisions applicable to mining activities are guaranteed to remain unchanged for a period of five years from the enactment of the Reformed DRC Mining Code.
Article 220 of the Reformed DRC Mining Code provides that the Prime Minister of the DRC may grant a number of incentives to provinces suffering from infrastructures deficits to encourage economic development from mining resources. Discussions are currently ongoing with the DRC government with respect to incentives that could be available under article 220 of the Reformed DRC Mining Code.
On 18 July 2012, the Convention between the government of the Republic of South Africa and the government of the DRC for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (Convention) came into effect. The Convention is applicable to (i) withholding taxes on amounts paid or credited on or after 1 January 2013; and (ii) 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 5 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’s rights and permits
AngloGold Ashanti holds a significant stake in the Kibali gold mine which is located in the north-eastern part of the DRC. The gold mine is owned by Kibali Goldmines SA (Kibali) which is a joint venture between Barrick (45 percent), AngloGold Ashanti (45 percent) and Société Minière de Kilo-Moto SA (SOKIMO) (10 percent) which represents the interest of the DRC government. The gold mine is operated by Barrick.
Kibali comprises 10 permits, of which seven expire in 2029 and three in 2030. The Kibali gold project covers an area of approximately 1,836 km2 in the Moto goldfields.
General laws relating to mining
Control of minerals and mining companies
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 and Natural Resources (LNR Minister) upon the advice of the Minerals Commission is subject to parliamentary ratification unless the mining lease falls into a class of transactions exempted by the Ghanaian Parliament.
The LNR Minister 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 LNR Minister believes, on reasonable grounds, that the public interest would be prejudiced by the person concerned becoming or remaining such a controller.
In 2019, Parliament passed the State Interests and Governance Authority Act, 2019 (Act 990) establishing the State Interests and Governance Authority (SIGA). The functions of SIGA include the oversight and administration of the State’s interests in state-owned enterprises, joint venture companies and other entities in which the State has an interest. This applies to mining companies on account of the Government’s mandatory free-carried equity interest in mining companies as provided for under the GMM Act. However, the Government of Ghana does not have a free-carried interest in any of AngloGold Ashanti’s mines in Ghana.
Stability and development agreements
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. A development agreement, as provided for by the GMM Act, may be made available to a mineral right holder with a proposed investment exceeding USD 500 million. The GMM Act also provides that the terms of a development agreement may contain stability terms as provided for in stability agreements. A development agreement is subject to parliamentary ratification.
In January 2020, the Minerals Commission proposed certain amendments to the GMM Act, including, among other measures, the abolishment of development agreements and the shortening of stability agreements from a period not exceeding 15 years to a period of five years (with a possible extension of another five years). The Minerals Commission is currently engaging with stakeholders on these proposed amendments. Following this engagement, the Minerals Commission may present the proposed amendments to the LNR Minister who can then decide to submit a draft bill to Parliament. If such bill were to be adopted by Parliament, it would not apply retroactively. As a result, the proposed amendments will not have an impact on existing development agreements, including the Obuasi Development Agreement (as described below).
Ghana Stability Agreement
On 18 February 2004, AngloGold Limited 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 between AngloGold Limited and Ashanti Goldfields Company Limited. 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 further 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.
In relation to the Obuasi mine, AngloGold Ashanti (Ghana) Limited (AGA Ghana) negotiated a new development agreement and a new tax concession agreement with the Government. These regulatory and fiscal agreements, which govern the redevelopment of the Obuasi mine, have received parliamentary approval in June 2018. As a result of the ratification of these agreements, the Ghana Stability Agreement ceased to apply to the Obuasi mine.
Notwithstanding the aforementioned, the Ghana Stability Agreement still applied to the Iduapriem mine until it expired in April 2019. Since this expiration AngloGold Ashanti (Iduapriem) Limited (AGA Iduapriem) does not benefit from any peculiar tax concessions or other protections resulting from the Ghana Stability Agreement anymore. Relevant engagements are currently ongoing between AGA Iduapriem with the Minerals Commission to obtain a new stability agreement and tax concession agreement for the Iduapriem mine.
Obuasi Development Agreement
On 21 June 2018, Parliament ratified the Development Agreement in relation to the Obuasi mine (Obuasi DA) which contains stability terms as provided for in stability agreements.
The Obuasi DA confers the following rights and obligations on AGA Ghana with respect to the Obuasi mine:
|•||Stabilization of the fiscal and regulatory framework (except for enactments promoting the use of Ghanaian goods and services) for a period of 10 years with a potential of it being extended for five years;|
|•||Confirmation of accounting currency to be US dollars;|
|•||Right to hold up to 80 percent of proceeds received from exporting minerals in foreign currencies outside of Ghana in accordance with existing arrangements;|
|•||Obligation to set up a “Community Trust Fund” for Obuasi funded at $2 per ounce produced;|
|•||Obligation to give preference to materials and goods made in Ghana as well as services provided by Ghanaians, entities incorporated or formed in Ghana and entities owned and controlled by Ghanaians;|
|•||Obligation to give preference to Ghanaian skills where they are available;|
|•||Obligation to employ high standards of safety; and|
|•||Right to peaceful enjoyment and protection against expropriation.|
Obuasi Tax Concession Agreement
The fiscal terms which will ordinarily form part of a single stabilisation document were separated from the Obuasi DA. Hence a separate tax concession agreement in relation to the Obuasi mine (Obuasi TCA) was signed with the Government. On 21 June 2018, Parliament ratified the Obuasi TCA.
The key terms of the Obuasi TCA are as follows:
|•||Corporate Income Tax to be 32.5 percent or such lower rates as may be fixed by law (current statutory rate is 35 percent);|
|•||Unutilised capital allowances carried forward by AGA Ghana which relate to the period before the effective date of the Obuasi TCA which have not already been utilized for the purposes of calculating taxable income shall continue to be carried forward until 31 December 2020;|
|•||Existing tax losses and new tax losses as well as a special concession to carry forward capital allowances to be converted into tax losses as at the end of 2020, will apply to AGA Ghana (whoever is the owner of AGA Ghana and whether or not AGA Ghana was to enter into a joint venture in respect of the Obuasi mine);|
|•||Exemptions of certain items from Import Duty;|
|•||Exemption of the following transactions from Capital Gains Tax:|
|•||an issue of shares by a publicly listed company which holds a direct or indirect interest in AGA Ghana in connection with a raising of finance, an acquisition or a reorganization or an issue of shares by a company in connection with a new listing;|
|•||transfers of shares in any publicly listed company which holds a direct or indirect interest in AGA Ghana other than a transfer of shares which results in a third party holding more than 35 percent of the shares in the listed company; and|
|•||a reorganization of a company which holds a direct or indirect interest in AGA Ghana where following the reorganization the shareholders are substantially similar to those shareholders of the ultimate parent entity immediately prior to the transaction;|
|•||Non-application of section 62(1) of the Income Tax Act, 2015 (Act 896) in relation to change in underlying ownership under the following circumstances:|
|•||a joint venture in relation to Obuasi gold mine;|
|•||an issue of shares by a publicly listed company which holds a direct or indirect interest in AGA Ghana in connection with a raising of finance, an acquisition or a reorganization or an issue of shares by a company in connection with a new listing;|
|•||transfers of shares in any publicly listed company which holds a direct or indirect interest in AGA Ghana other than a transfer of shares which results in a third party holding more than 50 percent of the shares in the listed company; and|
|•||a reorganization of a company which holds a direct or indirect interest in AGA Ghana where following the reorganization the shareholders are substantially similar to those shareholders of the ultimate parent entity immediately prior to the transaction;|
Sliding scale royalty rate ranging from 3 percent to 5 percent for a price ranging from $1,300 up to $2,000 and above per ounce instead of the current flat rate of 5 percent;
|•||Exemption from the payment of VAT on items imported under the Import Duty List up to 31 December 2023; and|
|•||Entitlement to a refund of VAT credit at the pre-production stage notwithstanding that AGA Ghana will not meet certain conditions for qualifying for refunds.|
Parliament passed the new Companies Act, 2019 (Act 992) which repeals the Companies Act, 1963 (Act 179). Act 992 introduced amendments to the regulation of companies in Ghana and establishes the Office of the Registrar of Companies. As a general matter, Act 992 maintained the provisions of Act 179. It, however, introduces stricter requirements for persons who are to be appointed as directors of a company as well as for company secretaries. Companies are also required to appoint new external auditors every six years.
A company is also not required to have bylaws or “regulations” as was the case under Act 179. Instead, a company may opt to have a registered constitution. Nevertheless, it is expected that the current regulations for AGA Ghana and AGA Iduapriem will be redrafted and filed at the Companies Registry. Further, a company is not required to have specific objects as prescribed previously. The implication of this is that a company can carry out any type of business unless otherwise specifically stated in the company’s constitution.
Government’s Golden Share
Section 60(1) of the GMM Act provides that the Government of Ghana can require a mining company to issue for no consideration to the Republic of Ghana a special share (Golden Share) by notice in writing to such mining company. The Government of Ghana exercised this right in respect of AGA Ghana and as a result was issued with a Golden Share in AGA Ghana. Under the Ghana Stability Agreement, this Golden Share was to apply solely to AGA Ghana’s assets and operations in Ghana. Following the expiration of the Ghana Stability Agreement in April 2019, the Government of Ghana reconfirmed and agreed in the Obuasi DA that the Government’s rights with respect to its Golden Share apply only in respect of AGA Ghana’s assets and operations in Ghana.
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:
|•||any amendment to or removal of the relevant provisions of the AGA Ghana Regulations setting out the rights and restrictions attaching to the Golden Share;|
|•||the voluntary winding-up or voluntary liquidation of AGA Ghana;|
|•||the redemption of or purchase by AGA Ghana of the Golden Share;|
|•||the disposal of any mining lease held by AGA Ghana or any subsidiary of AGA Ghana; and|
|•||any disposal by AGA Ghana (other than any disposal in the ordinary course of business of AGA Ghana) 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 AGA Ghana group taken as a whole. For this purpose, a part of the AGA Ghana 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 AGA Ghana group or (b) the average profits attributable to it represent at least 25 percent of the average profits of the AGA Ghana 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 AGA Ghana, the holder of the Golden Share is entitled to the sum of GHS 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 AGA Ghana. 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 AGA Ghana to redeem the Golden Share at any time in consideration of the payment to such holder of GHS 0.10 cedis.
Tax laws relating to mining
Currently, the main tax laws in Ghana include the following acts and regulations:
|•||Income Tax Act, 2015 (Act 896) (as amended) and Income Tax Regulations, 2016 (L.I. 2244);|
|•||Customs Act, 2015 (Act 891) (as amended) and Customs Regulations, 2016 (L.I. 2248);|
|•||Value Added Tax, 2013 (Act 870) (as amended) and Value Added Tax Regulations, 2016 (L.I. 2243); and|
Revenue Administration Act, 2016 (Act 915).
In 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. The Obuasi TCA limits the corporate income tax rate for AGA Ghana to 32.5 percent and AGA Iduapriem was protected until April 2019 from any increase exceeding the rate provided for under the Ghana Stability Agreement. Following the expiration of the Ghana Stability Agreement, AGA Iduapriem currently pays an income tax rate of 35 percent;|
|•||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. AGA Ghana is protected under the Obuasi TCA and AGA Iduapriem was protected until April 2019 from such change pursuant to the Ghana Stability Agreement;|
|•||Elimination of the 5 percent allowance on prior year additions. Prior to the 2012 amendment, the tax code granted an additional 5 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. The Obuasi TCA provides that unutilised capital allowances carried forward by AGA Ghana which relate to the period before the effective date of the Obuasi TCA which have not already been utilized for the purposes of calculating taxable income shall continue to be carried forward until 31 December 2020. From 1 January 2021, any such unutilized capital allowances shall be 20 percent each year on the total value of assets. AGA Iduapriem was protected until April 2019 from such change pursuant to the Ghana Stability Agreement; and|
|•||A ring fencing rule to prevent mining businesses from deducting or setting off costs from one mining area with another’s income. This ring fencing rule applies to AGA Ghana under the Obuasi TCA. Pursuant to the Ghana Stability Agreement, this change did not affect AGA Iduapriem until April 2019.|
Between 2018 and 2019, the following changes have been made to the fiscal regime of Ghana:
|•||The Minerals Income Investment Fund Bill has been passed by Parliament to establish a Fund to receive mineral royalties and related income as well as establish a special purpose vehicle to vest the Ghanaian Government’s carried interest in mining companies. It will also provide for the disbursement and management of the royalties received from mineral rights holders by Ghana’s Government. This would not impose any additional burden on mining companies such as AngloGold Ashanti but would only change the legal personality holding the Ghanaian Government’s carried interest; and|
The Income Tax (Amendment) Act, 2019 (Act 1007) was passed to revise the rates of tax for the chargeable income for resident individuals, and to provide for a tax holiday for automobile manufacturers and assemblers.
In 2018, the Value Added Tax (Amendment) Act, 2018 (Act 970) revised the VAT rate on taxable supplies to 12.5 percent. The National Health Insurance (Amendment) Act, 2018 (Act 971) decoupled the National Health Insurance Levy of 2.5 percent from the VAT and as a result is no longer included in the VAT. Act 971 converted the NHI Levy into a straight levy which is not subject to the input and output method of accounting for VAT. Same was done for the Ghana Education Trust Fund portion of the VAT under the Ghana Education Trust Fund (Amendment) Act, 2018 (Act 972). The implication is an increase in the total tax liability payable by the consumer. However, by virtue of the Obuasi DA and Obuasi TCA, AGA Ghana will not be affected by these revised rates. Following the expiration of the Ghana Stability Agreement, AGA Iduapriem is subject to these revised rates.
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. The Obuasi TCA for AGA Ghana provides for a stabilised income tax rate of 32.5 percent. Pursuant to the Ghana Stability Agreement, the ITA did not apply to AGA Iduapriem until April 2019. Following its expiration, AGA Iduapriem currently pays income tax at the rate of 35 percent.
The ITA provides for the carrying forward of losses for up to five years and those losses carried forward can only be used in the order in which they were generated or incurred. The ITA further prohibits the deferment of capital allowances calculated or granted for a particular year.
The ITA imposes a withholding tax on dividends paid by a person conducting mineral operations in Ghana at 8 percent. This is regardless of the amount of shareholding a shareholder or shareholders may have in the entity paying the dividend. However, a person holding or controlling directly or indirectly at least 25 percent of the voting power of the company paying the dividend may be allowed some tax exemptions. 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 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 over the years. For example, 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 and the Tax Amnesty Act, 2017 (Act 955) granted amnesty to persons who failed to register with the Commissioner-General or file their tax returns or pay taxes as required by enactments administered by the Commissioner-General.
Ground rent (mineral concession rent)
The Fees and Charges (Amendment) Instrument, 2015 (L.I. 2208) was passed by Parliament on 23 December 2015 and fixed, among other things, the payment of ground rent by mining companies at GHS 15 cedis per acre per annum.
AGA Ghana is paying $670 (GHS 3,705 cedis) per km2 per annum for all the AGA Ghana leases. The Obuasi DA protects AGA Ghana from any increase in ground rent for the duration of that development agreement. AGA Iduapriem is also paying $670 (GHS 3,705 cedis) per km2 per annum for all the AGA Iduapriem leases.
Customs Common External Tariff
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 meaning that the Member States of the Economic Community of West African States (ECOWAS) will apply the same customs tariffs to third countries. The CET is one of the instruments utilised to harmonize regulation in ECOWAS Member States and strengthen its common market.
Under the Minerals and Mining (Amendment) Act, 2015 (Act 900), the Minister will prescribe the royalty rate payable and the manner of payment by passing a Legislative Instrument or other subsidiary legislation. The current royalty rate amounts to 5 percent.
The company is required to pay ground rent to the Government of Ghana (as described above) as well as such other fees as are prescribed by legislation, including royalties on timber felled within the lease area.
Environmental laws relating to mining
In general, environmental laws and regulations in Ghana derive from the Constitution which imposes a duty on both the State and others to take appropriate measures to protect and safeguard the natural environment. Mining companies are required, under the GMM Act, Environmental Assessment Regulations, 1999 (L.I. 1652) and Water Use Regulations, 2001 (L.I. 1692), to obtain all necessary approvals from the Environmental Protection Agency (Ghana EPA), a regulatory body established under the Environmental Protection Agency Act, 1994 (Act 490), and, in appropriate cases, the Water Resources Commission and/or the Ghanaian Minerals Commission before undertaking mining operations. The Minerals and Mining (Health, Safety and Technical) Regulations, 2012 (L.I. 2182) also impose further obligations to obtain the necessary permits from the Inspectorate Division of the Ghana Minerals Commission for the operation of mines. The GMM Act also requires that mining operations in Ghana comply with all laws for the protection of the environment. Compliance with the relevant laws are enforced by a regime of sanctions including imposition of fines and in some cases a term of imprisonment.
As part of the Ghanaian environmental laws and regulations, mining operations are required to undergo an environmental impact assessment process that culminates in the issuance of an environmental permit prior to commencing operations. Environmental Management Plans are to be submitted to the Ghana EPA within 18 months after issuance of the environmental permit and then every three years thereafter. The plan must include details of the likely impacts of mining operations on the environment and local communities, as well as a comprehensive plan and timetable for actions to mitigate and remediate any adverse effects of the mining operations. Approval of the management plan results in the issuance of an environmental certificate.
In June 2014, the Ghana EPA 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 and have not yet become effective. The Mining Community Development Scheme, which directly sponsors socio-economic development in communities in which mining operations take place or which are affected by mining activities, has since been established pursuant to the Minerals Development Fund Act, 2016 (Act 912).
Illegal and unsustainable mining practices
The Multilateral Mining Integrated Project (MMIP) is a 5-year project launched by the Government of Ghana in 2017 to address illegal and unsustainable mining practices in Ghana. The MMIP “combines a Legislation, Enforcement, Civil, Integrated and Technological Approach (LECITA) as a sustainable and structured yet regimented conjoint concept” to combat illegal mining. The MMIP involves (i) reviewing and enforcing 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 protection and monitoring activities, and (vi) building the capacity of artisanal and small-scale miners and regulatory institutions.
In addition, other initiatives have been undertaken to combat illegal mining. For example, the Minerals and Mining (Amendment) Act, 2015 (Act 900) makes provision for the confiscation of the equipment of illegal miners and, as a result of recent illegal mining activities, the GMM Act was amended to increase penalties for illegal mining and expressly criminalize the aiding and abetting of illegal mining activities. The prescribed minimum sentence for illegal mining is now 15 years and maximum of 25 years for foreigners who engage in illegal mining.
Foreign exchange, export and other rules
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 fulfil 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 5 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, 1992 (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 key details are as follows:
|•||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 4 February 2014;|
|•||Except for transfers from FEA to FCA which are still prohibited, all other transfers between accounts are permitted;|
|•||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; and|
|•||The threshold for transfers abroad without initial documentation remains at $50,000.00.|
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.
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 in 2015. From 15 September 2015, all exports of gold and diamonds must be carried out through the Precious Minerals Marketing Company Ltd (PMMC), except where the exporter is the holder of a licence that permits it to export directly. 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 LNR Minister to sell and export its production.
The Bank of Ghana issued a notice (Notice No. BG/GOV/SEC/2016/02) which, among other things, 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 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 were opposed to this directive due to its potential negative impact on mining companies in the region. As a result, the Chamber initiated proceedings to reverse or modify the directive. Following discussions in respect of the mining industry’s concerns, the Chamber and Government agreed on the modalities for implementing the national assaying policy and it was introduced in February 2018 following a one-month pilot among certain mining companies. A final document for the implementation of the program will be executed once the Chamber and the PMMC address a few outstanding issues regarding assaying methodologies.
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. The 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 January 2020, the Minerals Commission circulated draft Minerals and Mining (Local Content and Local Participation) Regulations intended to expand the scope of local content requirements in the mining industry. The draft specifically seeks to expand the number of mining related businesses required to comply with local content requirements.
AngloGold Ashanti’s rights and permits
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 km2 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 km2 was also granted, resulting in the total area under the mining lease increasing to 474 km2.
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 km2 of the area to the Government of Ghana, reducing the lease areas to 201.46 km2. 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.
AGA Ghana is not required to pay annual mineral right fees as the AGA Ghana Leases were granted prior to the enactment of the GMM Act which imposes such fees. The GMM Act provides that leases granted under laws subsisting immediately before the coming
into force of the GMM Act shall continue to be governed by such pre-existing laws. As a result, the AGA Ghana Leases are still regulated by the Minerals and Mining Law, 1986 (PNDCL 153), as amended (notwithstanding the repeal of PNDCL 153 by the GMM Act).
The Iduapriem mine had been granted four different mining leases: the Iduapriem Mining Lease (36.47 km2), the Ajopa Mining Lease (46.12 km2), the Teberebie Mining Lease (28.53 km2) and the Ajopa South West Mining Lease (28.10 km2). All four mining leases expired between 2018 and 2019. All relevant documents were submitted to apply for the renewal of the leases in September 2017. In January 2020, the Minerals Commission issued a Notice of Grant of Mining Lease for all four leases and the LNR Minister approved the grant of the mining leases. All four renewed leases will expire in February 2025.
AGA Iduapriem is required to pay an annual mineral right fee of $178,000 with respect to the Iduapriem Lease, $136,000 with respect to the Teberebie Lease, $134,000 with respect to the Ajopa South West Lease and $220,000 with respect to the Ajopa lease.
General laws relating to mining
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 Guinea Mining Code).
The Guinea 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 Guinea 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. In 2019, an inter-ministerial committee was created to supervise and control the Fodel through the adoption of the joint order AC/2019/089/MMG/MATD/SGG setting out the conditions for the constitution, powers and management of said inter-ministerial committee.
AngloGold Ashanti’s rights and permits
The right to undertake mining operations in Guinea 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 (Mining Concession). The Mining Concession was originally covered by a mining convention entered into with the Republic of Guinea on 11 November 1993 (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 Guinea Mining Code, which came into force after the conclusion of the Convention de Base, confirms the validity of mining titles previously issued. The Guinea Mining Code also provides that for holders of validly signed and ratified mining conventions, the application of the Guinea 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 concession holder and the State.
On 28 June 2016, SAG and the Government of Guinea concluded a revised and consolidated convention de base (Revised Convention de Base) which encompasses a renewal of the term of the original Convention de Base and other amendments necessary to support an expansion project proposed to extend the life of the Siguiri mine (the Expansion).
In compliance with the provisions of the Guinea 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 of Guinea (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 Guinea Mining Code (the prior mining code) and are only subject to the provisions of the Guinea 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 conditions 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 5 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: 3 percent if the gold price is USD 1,300 or less, 5 percent, if above USD 1,300 and up to USD 2,000 and 7 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 approximately 1,495 km2. SAG has the exclusive right to explore and mine in any part of the concession area for the duration 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 12 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.
General laws relating to mining
The mining industry in Mali is currently undergoing a reform as the mining code enacted on 27 February 2012 (2012 Mali Mining Code), which, until recently, was the primary regulation in the mining sector, was replaced by ordinance No.2019-022/P-RM dated 27 September 2019 containing the new mining code of the Republic of Mali (2019 Mali Mining Code). The revision process of Malian mining legislation is not yet completed as the 2019 Mali Mining Code is to be supplemented by one or several decree(s) containing the conditions of implementation of the 2019 Mali Mining Code. While the 2019 Mali Mining Code has entered into force, it appears that the Malian authorities are awaiting the finalization of the various implementing decree(s) to actually enforce the 2019 Mali Mining Code.
Pending the effective enforcement of the 2019 Mali Mining Code by the Malian authorities, the mining operations carried out by AngloGold Ashanti entities in Mali (as further described below), benefit from the stabilisation clauses in their mining conventions, and thus remain subject to the provisions of the previous mining codes of 1970 and 1991 and are also, for residual matters, expressly subject to the provisions of the 2012 Mali Mining Code. The transitory rules of the 2012 Mali Mining Code specify that provisions in respect of certain matters such as administrative surveillance, mine police, rehabilitation and mine closure apply to mining titles issued prior to its entry into in force.
Once the 2019 Mali Mining Code is enforced by the Malian authorities, AngloGold Ashanti entities in Mali will be subject to all the provisions of the 2019 Mali Mining Code except with respect to the validity, scope and duration of their exploitation permits and the provisions on tax and customs regime contained in their mining conventions for their remaining duration. In this regard, the transitory
rules of the 2019 Mali Mining Code specify that mining conventions in force remain valid for their remaining term and their holders continue to benefit from the stability of the tax and customs regime set out therein.
The mining regime deriving from the 2019 Mali Mining Code remains incomplete to date, pending the adoption of the implementing decree(s).
Exploration and prospecting activities are carried out under exploration authorizations (autorisation d’exploration) or exploration permits (permis de recherche). Exploration authorizations and exploration permits give their holder the exclusive right to carry out exploration activities over a given area. Exploration authorizations are granted for a non-renewable period of three years, while exploration permits are renewable twice for additional 3-year periods.
Applications for exploration authorizations and exploration permits must contain various documents attesting to the financial and technical capacity of the applicant as well as a detailed works and costs programme. Exploration authorizations are granted by the Mining Administration (Administration chargée des Mines) while exploration permits are granted by Ministerial Order.
A large scale permit exploitation permit (permis d’exploitation de grande mine) is required to mine a deposit located within the area of an exploration permit. The large scale exploitation permit grants an exclusive right to exploit the named substances and proceed with the processing and commercialization of the substances extracted within its perimeter. Large scale exploitation permits are granted for a maximum period of 12 years renewable for 10 year-periods until depletion of the deposits. The large scale exploitation permit is granted only to the holder of an exploration permit and covers only the area governed by the exploration permit. An application must be submitted to the Mining Administration (Administration chargée des Mines).
As soon as the large scale exploitation permit is granted, the permit holder must incorporate a company under the laws of Mali. The permit holder will assign the large scale exploitation 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. In addition, the company is required to ensure that private Malian investors are offered the possibility to acquire 5 percent of their capital.
Applications for large scale exploitation permits must contain various documents attesting to the financial and technical capacity of the applicant, a feasibility study, a detailed environmental study in respect of the impact of the project on the environment, an environmental permit, a closure and rehabilitation plan as well as a community development plan. The large scale exploitation permit is granted by decree of the Head of Government.
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, the duration of which is 20 years.
AngloGold Ashanti’s rights and permits
Historically, AngloGold Ashanti had 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 complied with all applicable requirements and the relevant permits were issued (subject to the developments regarding the permit for Yatela, as described below).
Morila’s exploitation permit covers approximately 200 km2 and was issued on 4 August 1999. Morila has a 30-year permit which expires in 2029. Mining of ore has ceased at Morila.
On 23 December 2019, AngloGold Ashanti announced that it, together with its joint venture partner IAMGOLD Corporation, has agreed to sell their interests in Société d’Exploitation des Mines d’Or de Sadiola S.A. to Allied Gold Corp. This sale transaction is subject to the fulfilment, or waiver, of a number of conditions precedent which are expected to be fulfilled or waived by the end of April 2020. Sadiola’s prospecting and exploitation agreement covers approximately 303 km2 and was originally entered into on 5 April 1990. Sadiola has a 30-year permit which expires in 2024.
On 14 February 2019, AngloGold Ashanti sold, together with its joint venture partner IAMGOLD Corporation, their holdings in Société d’Exploitation des Mines d’Or de Yatela to the Government of Mali. Certain conditions precedent currently remain outstanding. Prior to the sale, Yatela had begun the implementation of a closure plan in order to relinquish the property. In parallel, discussions had 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. This error has since then been corrected through the issuance of decree 2017-00951/PM-RM dated 28 November 2017 and decree n°2018-0368/PR-RM dated 12 April 2018, the purpose
of which was to reinstate Yatela in all of its rights under its exploitation permit. Yatela’s exploitation permit covers approximately 212 km2. Yatela has a 30-year permit which expires in 2030.
General laws relating to mining
Tanzania Mining Act and Tanzania Mining Regulations
Mineral rights in the United Republic of Tanzania are principally governed by the Mining Act, 2010 (No. 14) (Tanzania Mining Act) as amended in 2017 by the Written Laws (Miscellaneous Amendments) Act, 2017 (No. 7) and which was revised and published by the Attorney General of Tanzania on 30 October 2018 as the Mining Act, Chapter 123 (R.E. 2018), and the Mining Regulations, 2010 (Tanzania Mining Regulations), as amended in 2018, which include: Mining (Mineral Beneficiation) Regulations, 2018 as amended in 2019; Mining (Minerals and Mineral Concentrates Trading) Regulations, 2018 as amended in 2019; Mining (Radioactive Minerals) Regulations, 2018; Mining (Local Content) Regulations, 2018 as amended in 2019; Mining (Geological Survey) Regulations, 2018; and the Mining (Audit and Inspection of Records) Regulations, 2018. Other regulations are: Mining (Environmental Protection For Small Scale Mining) Regulations, 2010; Mining (Safety, Occupational Health and Environmental Protection) Regulations, 2010; Mining (Mineral and Gem Houses) Regulations, 2019; Mining (Mining Shareholding and Public Offering) Regulations, 2016 as amended in 2017; Mining (Diamond Trading) Regulation, 2019; Natural Wealth and Resources (Permanent Sovereignty) Code of Conduct for Investors in Natural Resources Regulations, 2020 (Permanent Sovereignty Regulations); and The Natural Wealth Contracts (Review and Re-Negotiation of Unconscionable Terms) Regulations, 2020. The application of the Code of Conduct under the Permanent Sovereignty Regulations extends to employees, agents, suppliers and consultants and requires them to comply with other binding instruments and decisions made based on such instruments, in addition to policies, laws and regulations. The Permanent Sovereignty Regulations make it mandatory to seek the advice of an office bearer or the office of Attorney General, if the requirements of the Code, provisions of the Mining Act or other instruments relating to natural wealth and resources become ambiguous, unclear or in conflict resulting into uncertainty. Further, the Code of Conduct requires investors to conduct periodic reviews in respect of their compliance with such legislation in order to ensure that the investment does not result into unconscionable behaviours prohibited by the laws of Tanzania.
The Tanzania Mining Act and the Tanzania Mining Regulations came into force in November 2010 followed by amendments to the Tanzania Mining Act in 2017 and subsequent amendments to the Tanzania Mining Regulations in 2018 and 2019.
Amendments of the Tanzania Mining Act and the Tanzania Mining Regulations
As mentioned above, the Tanzania Mining Act was amended in 2017 followed by an amendment of the Tanzania Mining Regulations in 2018, together with an Executive Order introducing the following:
|•||Dissolution of the Tanzania Minerals Audit Agency whose functions and powers have now been transferred to the Geological Survey of Tanzania (GST);|
|•||Dissolution of the Mining Advisory Board and introduction of the Tanzania Mining Commission. The functions and powers of the Mining Advisory Board have been taken over by the Mining Commission, including the functions of the Commissioner for Minerals. However, the Mining Commission has been made responsible for matters related to auditing and monitoring of mineral production in Tanzania. The Mining Commission has powers to audit quality and quantity of mineral produced and exported by mining entities, financial records of mining entities for the purposes of tax assessments, and environmental management expenditures of the mining entities for the purpose of assessment of compliance to the mine closure plan. 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 Tanzania 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 Tanzania Mining Regulations. These will be determined by the Mining Commission alongside the work programme. The relevant Minister may prescribe additional minimum local content thresholds;
|•||To qualify for holding a Mining Licence in Tanzania, 5 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 Government of Tanzania pursuant to Section 10 of the Tanzania Mining Act (i.e. free-carried interest). This amount is determined, and may be varied, by the relevant Minister;|
|•||Establishment of the Local Content Committee (LC Committee) which will oversee the implementation of the Tanzania Mining Regulations and which is composed of a member of the Mining 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 Mining Commission. The LC Committee sets minimum standards for local content plans and reports to the Mining Commission;|
|•||Introduction of a statutory procedure for the conduct of Corporate Social Responsibility (CSR), whereby a company is required to prepare annually a credible CSR plan jointly agreed with the local government authorities in consultation with the Minister for Finance and the Minister for Local Government Authorities; and|
Cancellation of retention licences; right over such licences revert to the Government of Tanzania.
Minimum shareholding and public offering
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 Government of Tanzania published its new Tanzania Mining Regulations, 2018, which contain, amongst others, the implementation provisions of the amended Tanzania 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 6 months of the regulations coming into force, which was on 24 February 2017. However, we believe the listing requirement conflicts with the mining development agreement.
Along with other major mining companies, AngloGold Ashanti’s subsidiaries are seeking a constructive dialogue with the Government of Tanzania to gain assurances that the Geita gold mine will not be affected by the legal and fiscal changes mentioned above, given their mining development agreements which guarantee fiscal and regulatory stability as well as an agreement between all parties before material legal and regulatory changes are made. As a precautionary step to safeguard its interests, AngloGold Ashanti commenced international arbitration proceedings against the Government of Tanzania in connection with the enactment of this legislation in July 2017. These arbitral proceedings are currently stayed until 13 May 2020 in order to afford the parties the opportunity to achieve an amicable resolution of the dispute.
The arbitration action against the Government of Tanzania seeks declaratory relief in accordance with the terms of the mining development agreement to preserve the company’ and its shareholders’ rights and interests in the Geita gold mine, including confirmation from the Government of Tanzania that the company is exempt from the listing requirement. The arbitration proceedings also seek to confirm that AngloGold Ashanti does not, as a result of its existing mining development agreement, fall within the scope of the new mining legislation, under which the Government of Tanzania has the right to (i) renegotiate existing mining agreements at its discretion, (ii) receive a free-carried interest of no less than 16 percent in all mining projects, and (iii) acquire up to 50 percent of the shares of the mining company commensurate with the total tax expenditure incurred by the Government in favour of the mining company, and which includes an increase in the rate of revenue royalties from 4 to 6 percent and a 1 percent clearance fee. 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. See also “Item 8A: Legal Proceedings-Tanzania”.
Mineral right licences
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 Tanzania 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 USD 100 million);|
|•||mining licence (if the proposed capital investment is equal to between USD 100,000 and USD 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 and special mining licences are relevant.
A prospecting licence grants the holder the exclusive right to prospect in the area covered by the licence for all minerals within the class of minerals applied for. The classes that can be applied for include, amongst others, metallic minerals; energy minerals; gemstones other than kimberlitic diamonds; and kimberlitic diamonds.
An application for a prospecting licence is made to the Mining Commission and the licence is valid for an initial term of four years. After the initial term, the licence is renewable for a further period of three years, with no option for renewal thereafter. Upon 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 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.
Holder of prospecting licences have the obligations to: (i) commence prospecting operations within three months or such further period as the Mining Commission may allow from the date of the grant of the licence or the date as stated in the licence as commencement date; (ii) give notice to the Mining Commission on discovery of any mineral deposit of potential commercial value; and (iii) adhere to the prospecting programme which is attached to the licence and expend on prospecting operations not less than the amount prescribed.
A prospecting licence is not freely transferable and requires the Mining Commission to be notified of any transfer of a prospecting licence. The Mining Commission 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.
Mining Licence / Special Mining Licence
Mining is mainly carried out through either a mining licence or a special mining licence, both of which confer on the 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.
The holder of a special mining licence may apply for renewal of its licence at any time but no later than one year before the expiry of the licence. The renewal shall not be for a period exceeding the estimate life of the remaining ore body. The Mining Commission may reject an application for renewal if: (i) the applicant is in default; (ii) the applicant was issued with a notice of default and failed to rectify the default or the default is capable of remedial; (iii) the development of the area has not proceeded with reasonable diligence as agreed in the relevant mining development agreement; (iv) minerals are not produced in workable quantities; (v) the program of intended mining operations for the renewal will not ensure proper development of resources; and (vi) the applicant does not have the relevant environmental certificate as required by the Environmental Management Act, 2004 (No. 20).
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 Mining Commission which is the relevant licensing authority. 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 of Minerals 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 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.
Tax laws relating to mining
The Finance Act, 2015 (No. 16) 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 offshore parent company. This provision was introduced by the Finance Act, 2012 (No. 8) 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 Finance Act, 2017 (No. 4) came into force on 1 July 2017 and imposes and alters certain taxes, duties, levies and fees. It further amends certain written laws relating to the collection and management of public revenue. Among other provisions, it has introduced inspection or clearance fees on the exportation or domestic use of minerals. Such exportation or domestic use is restricted unless
such minerals have been inspected or cleared at the mining areas, ports, airports, border or posts and the clearing fee of 1 percent of the gross value of the minerals has been paid by the exporter or any other person in possession thereof.
Value Added Tax Act
The Value Added Tax Act, 2014 (No. 5) (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 below, following the signature of an addendum to the mining 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 Finances Act, 1982 (No. 9).
Environmental Management Fees and Charges
The Environmental Management (Fees and Charges) (Amendment) Regulations, 2016 (EM 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 EM Regulations, the fees involved are “0.1 percent of the total project costs”. However, the EM Regulations have not defined the term “project cost” nor have they provided a detailed breakdown on the determination of the project cost.
On 15 September 2015, the Non-Citizens (Employment Regulation) Act, 2015 (No. 1) (Non-Citizens Act) came into force. The Non-Citizens Act vests powers concerning work permits 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. Before granting the work permit, the Labour Commissioner must satisfy himself that all efforts have been explored to acquire a local expert. Further, the company is required to submit a succession plan which sets out a well-articulated plan for the transfer of the non-citizen’s knowledge and expertise to Tanzanian citizens. 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 three months are required to apply for an STP. The application for an STP is made to the Ministry of Labour and Employment.
Section 46(6) of the Social Security Laws (Amendments) Act, 2012 (No. 5) amended the National Social Security Fund Act, 1997 (No. 28) by providing that “an employer of a non-citizen shall remit contribution for such employee in accordance with the Act”. This means that from 15 June 2012 non-citizens are also required to be insured as any other person and their contributions should be channelled to the Nationals Social Security Fund.
The Workers’ Compensation Act, 2008 (No. 20) requires a company as the employer to contribute 1 percent of the employee’s salary and fixed allowance to the Workers Compensation Fund. Following the adoption of the Workers’ Compensation Regulations 2016, all employers were required to implement the requirements of the Workers’ Compensation Act by 30 June 2016.
Transparency and accountability laws
In 2015, the Tanzania Extractive Industries (Transparency and Accountability) Act, 2015 (No. 23) (TAA) came into force. The TAA establishes the Tanzania Extractive Industries (Transparency and Accountability) Committee (TAA Committee), an independent Government entity which is an oversight body for promoting and enhancing transparency and accountability in the extractive industry.
The TAA Committee has powers under the TAA to impose obligations on specified extractive industries and statutory recipients to receive information on reconciliation on payments made and revenues received by the Government of Tanzania. In addition, an extractive industry is required under the TAA to submit to the TAA Committee annual reports containing information on local content and corporate social responsibility. Further, the TAA demands all concessions, contracts and licences to be made public as well as all revenue collected from the extractive industry.
Natural resources legislation
The Government of Tanzania enacted two laws in respect of natural resources that came into force in July 2017: the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act, 2017 (No. 6) (Unconscionable Terms Act)
and the Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 (No. 5) (Permanent Sovereignty Act and together with the Unconscionable Terms Act, the Natural Resources laws).
The Natural Resources laws provide that Tanzania has sovereignty over its natural resources and require that all arrangements or agreements that relate to “natural wealth and resources” are subject to review by the National Assembly. Such agreements must fully secure the interests of the people of Tanzania. During a 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 are reviewed by the Government. The natural wealth and resources of Tanzania shall be inalienable and remain as the property of the people of Tanzania held in trust by the President.
In addition, under the laws, disputes over natural wealth and resources will not be subject to any proceedings in any foreign court or tribunal. As a result, investors are restricted from accessing international dispute resolution mechanisms. Accordingly, companies are now required to adopt Tanzanian law and local dispute resolution in all mining agreements. As such, all disputes will be handles by Tanzanian judicial bodies or any other Tanzania government body vested with powers to resolve disputes.
Moreover, 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 an equitable stake in the exploitation of mining resources, all project earnings must be retained in Tanzanian banks. Investors are also prevented from freely exporting raw minerals and repatriating funds.
In particular, under the Unconscionable Terms Act, a term is considered “unconscionable”, if the requirements or provisions of the agreement:
|•||Aim at restricting the right of the state to exercise full permanent sovereignty over its wealth, natural resources and economic activity;|
|•||Are restricting the right of the state to exercise authority over foreign investment within the country and in accordance with the laws of Tanzania;|
|•||Are inequitable and onerous to the state;|
|•||Restrict periodic review of life-time arrangements or agreements;|
|•||Secure preferential treatment designed to create a separate legal regime to be applied discriminatorily for the benefit of a particular investor;|
|•||Are restricting the right of the state to regulate activities of transnational corporations within the country and to take measures to ensure that such activities comply with the laws of the land;|
|•||Are depriving the people of Tanzania of the economic benefits derived from subjecting natural wealth and resources to beneficiation in the country;|
|•||Are by nature empowering transnational corporations to intervene in the internal affairs of Tanzania;|
|•||Are subjecting the state to the jurisdiction of foreign laws and foreign courts or tribunals;|
|•||Expressly or implicitly undermine the effectiveness of state measures to protect the environment or the use of environmental friendly technology; or|
|•||Aim at doing any other act the effect of which undermines or is injurious to the welfare of the people of Tanzania or the economic prosperity of the nation.|
Section 6 of the Unconscionable Terms Act specifically provides that where there is an unconscionable term, the National Assembly may pass a resolution for re-negotiation of the agreement whereupon the Government shall serve notice to the investor to re-negotiate the term or agreement. The Government and the particular investor have 90 days from the notice date to re-negotiate the term or agreement. This period can be extended if both parties consent. If both parties fail to revise the unconscionable term, the term will be deemed removed from the agreement.
AngloGold Ashanti’s rights and permits
The Geita gold mine is located in the Lake Victoria goldfields of the Mwanza region of Tanzania. AngloGold Ashanti has concluded a mining development agreement with the Ministry of Minerals on 24 June 1999 and was issued a special mining licence covering approximately 196 km2 for a period of 25 years, which expires on 26 August 2024.
On 9 October 2014, an addendum to the mining development agreement was entered into ratifying the following changes:
|•||An increase in the royalty rate from 3 percent to 4 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, 1973 (No. 33) 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 USD 200,000 per annum as provided under Article 4 of the company’s mining development agreement).|
In March 2020, Geita Gold Mining Limited received the consent of the Minister of Minerals to change the mining method under its special mining license from open pit to underground method, subject to the requisite terms and conditions.
General laws relating to mining
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) (Native Title Act) 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.
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.
Tax laws relating to mining
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.
Environmental laws relating to mining
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.
AngloGold Ashanti’s rights and permits
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.
AngloGold Ashanti is also conducting early stage exploration activities in Queensland under the Mineral Resources Act 1989 (QLD). AngloGold Ashanti holds 18 exploration permits covering 497,087 hectares. Each permit is granted with an initial term of five years, renewable for further periods of not more than five years. There is an entitlement to convert exploration permits to mining titles in the form of mining claims, mining leases or mineral development licences.
General laws relating to mining and land ownership
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.
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 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 (Mining Investment Law), 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.
On 30 September 2010, the National Law on Minimum Requirements for the Protection of Glaciers (Law No. 26, 639) (Glacier Law) was enacted in Argentina, banning new mining exploration and exploitation activities on glaciers and “peri-glacial” areas. The Glacier 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 Glacier Law establishes a broad definition of “peri-glacial” areas that, together with glacial areas, must be surveyed by an existing national government agency specifically appointed to this end every five years. The area where the Cerro Vanguardia project is located does not include any glaciers or peri-glacial areas according to the inventory of glaciers which was published in June 2018. The constitutionality of the Glacier Law has been challenged by some mining companies along with the
Province of San Juan (which hosts large mining projects), but the National Supreme Court of Justice of Argentina rejected these claims on 4 June 2019.
Rural Land Law
On 27 December 2011, the Argentinean National Congress passed a law on the Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land (Law No. 26, 737) (Rural Land Law) 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 the Rural Land 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.
Federal Mining Agreement
On 13 June 2017, the national government and the provinces in whose territories the main mining projects of Argentina are located, signed the New 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. Additionally, the FMA included setting forth mining royalties up to 3 percent of the gross value of commercialized minerals, without any deductions other than VAT. 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 1 percent to 3 percent calculated at pit-head value of the mineral extracted thus bringing it to the cap of the Mining Investment Law.
Foreign exchange control regime
On 1 September 2019, by means of Executive Decree No. 609/2019 (Decree), the national government re-established foreign exchange and export controls. The Decree imposes, among other measures, the obligation of Argentinean residents to transfer to Argentina and/or sell for Argentinean pesos in the Argentinean foreign exchange market (mercado libre de cambios) the countervalue (contravalor) from their exports of goods within 15 to 365 calendar days depending on the goods exported and the relationship with the importer. Regardless of the applicable maximum term, upon collection of the export, the proceeds thereof must be sold for Argentinean pesos in the Argentinean foreign exchange market no later than five business days from the date of collection.
The Decree also authorized the Central Bank of Argentina to establish the requirements for compliance with the measures set out therein. On the same date, the Argentinean Central Bank, as the regulatory authority in charge of administering the Argentinean foreign exchange market, issued Communication “A” 6770 establishing the specific regulatory requirements in order to implement the measures adopted by the national government. The Argentinean Central Bank delegated the responsibility to follow up and supervise compliance with the repatriation obligation of exporters to financial institutions. In this respect, it implemented the so-called “Follow-up regime for foreign exchange countervalue from exports of goods” (Seguimiento de las negociaciones de divisas por exportaciones de bienes or SECOEXPO). Upon the expiration of the applicable term to transfer and sell the proceeds of exports, the designated financial institution must inform the Argentinean Central Bank if the exporter has complied with its obligations or not.
On 4 September 2018, export duties were imposed by Decree No. 793/2018 (Export Duties Decree) published by the Argentinean government which will be applicable until 31 December 2020. The export duty is set at 12 percent ad valorem. The Export Duties Decree, if not compensated with other tax reductions, affects the tax stability guarantee granted to Cerro Vanguardia S.A. (CVSA) in 1996 in light of the fact that at the time export duties were zero percent.
On 26 February 2019, the Argentinean tax and mining authorities published a resolution establishing a mechanism to reimburse or compensate federal taxes paid in excess of the total tax burden provided for by applicable tax stability guarantees. The resolution provides for an administrative procedure to be followed to prove that the actual tax burden is higher than the one a company should have based on its tax stability guarantee. Cerro Vanguardia S.A. initiated this procedure in order to claim reimbursement of, or compensation for, export taxes paid during 2018 in excess of the total tax burden provided for by its tax stability guarantee. The
National Mining Secretariat issued a favorable opinion regarding Cerro Vanguardia S.A.’s claim, which is currently under review by the relevant customs authorities (Customs Regional Division - Patagonia).
On 21 December 2019, the National Law on Social Solidarity and Productive Reactivation (Law No. 27, 541) (Solidarity Law) was enacted. The Solidarity Law grants the national government power until 31 December 2021 to impose export duties which may not exceed certain caps. For example, the Solidarity Law provides that export duties on mining exports cannot exceed 8% of the taxable value or official FOB price. It is currently unclear whether this 8% limit applies automatically or whether it requires the issuance of a decree by the national government.
Environmental laws relating to mining
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.
AngloGold Ashanti’s rights and permits
In the case of Cerro Vanguardia, AngloGold Ashanti’s operation in Argentina, the mining concession holder is AngloGold Ashanti’s partner, Fomento Minero de Santa Cruz S.E. (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 km2) for a 40-year period, which expires on 26 December 2036. Cerro Vanguardia S.A. is a corporation incorporated in Argentina indirectly controlled by AngloGold Ashanti, with Fomicruz as minority shareholder. On 14 August 1996, Cerro Vanguardia S.A. obtained its tax, customs and foreign exchange stability certificate, which expires in 2026.
General laws relating to mining and land ownership
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 Brazilian 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 Brazilian Constitution of 1988). AngloGold Ashanti’s operations in Brazil consist of both claimstake mines and granted mines.
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.
Tax laws relating to mining
During the exploration period, the mining titleholder has to pay an Annual Rate per Hectare (Taxa Annual por Hectare or TAH), 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 (Compensação Financeira pela Exploração Mineral or CFEM). The CFEM which is 1.5 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 of ore extracted. In the states of Minas Gerais and Goiás, however, gold ore was exempted from the collection of this new duty.
Environmental laws relating to mining
Following the catastrophic failure of a tailings storage facility (TSF) operated by Vale in the state of Minas Gerais in January 2019, Brazilian executive, legislative and judiciary bodies have generally increased scrutiny of mining operations in Brazil, and of TSFs in particular, and have been considering, and in some cases adopting, stricter laws and regulations applicable to the approval, licensing, construction, management, closure and decommissioning of TSFs in Brazil. For example, some of the new measures under consideration or enacted include (without limitation):
|•||A ban prohibiting construction of new upstream tailings dams;|
|•||New requirements mandating reinforcement and earlier-than-planned closure of existing upstream TSFs;|
|•||New requirements mandating removal of all tailings material from TSFs (“decharacterization”), regardless of the original design method, upon closure and prior to decommissioning and environmental rehabilitation;|
New requirements mandating bi-annual (each year in March and September) TSF Stability Declarations for approved TSFs, signed by an external engineering consultancy and geotechnical senior manager as well as company directors, to be submitted to the ANM and the relevant state environmental agency;
|•||New requirements for companies to place a surety bond in the preliminary permit phase; and|
|•||Banning permits for any new dam where there are communities within 10 km downstream or where a dam break could affect communities in less than 30 minutes (within the Self-Rescue Zone).|
Furthermore, in addition to the 156 bills that were already being considered by the National Congress, another 51 bills dealing with the mining sector were presented in 2019 that may significantly impact the mining sector and the company. For example, Federal Bill No. 550/2019, if adopted, will require the company to complete the decharacterization (descaracterização) and decommissioning of its TSF at the Serra Grande mine in the state of Goiás, which was built by the upstream method, by 25 February 2022. For the company’s other TSFs in Brazil, all of which are downstream or “centreline” designs, the following options are permitted: either (i) the structure must be decharacterized and decommissioned, (ii) the population must be relocated, with reparations for loss of cultural heritage, or (iii) reinforcement works that guarantee the effective stability of the structure must be carried out, by decision of the public authorities, taking into account the previous nature of the dam in relation to the occupation and technical-financial viability of the alternatives. Even if reinforcement works are completed, the company will still be required to decharacterize and decommission the TSF at the end of the life of the mine. This bill also introduces the requirement to present a surety bond at the planning stages for the TSF. The mining sector, including the Minas Gerais Industry Association (FIEMG), the National Industry Association (CNI) and the Brazilian Mining Chamber (IBRAM), is liaising with the legislative authorities and other stakeholders in an effort to introduce amendments to this proposed bill which would mitigate some of the concerns identified by the mining industry, in particular, regarding the requirement to remove tailings material from decommissioned TSFs. As of yet, none of these new bills have been approved by the National Congress.
At the federal level, the ANM issued Resolution No. 13/19 in August 2019 (replacing its earlier Resolution No. 4/19) which adopted additional regulatory measures to ensure the stability of TSFs, in particular those built or heightened by the upstream method or by any method declared as “unknown”. Among other things, ANM Resolution No. 13/19 prohibits the upstream method for the construction or heightening of tailings dams throughout the national territory of Brazil. It further requires the deactivation of TSFs constructed or heightened upstream or by an “unknown” method by 15 September 2021 as well as the decommissioning of such TSFs by 15 August 2022 to 15 September 2027 (depending on the capacity volume). ANM Resolution No. 13/19 does not require complete removal of tailings material from TSFs. As a result, the Serra Grande mine in the state of Goiás is in the process of reinforcing the dam walls of its upstream TSF in advance of its expected deactivation by 15 September 2021. In addition, the company has begun the process of evaluating alternate structures for this upstream TSF, as well as any potential increases in regulatory and cost obligations as a result of new requirements applicable to TSFs.
At the state level, the state legislator in the state of Minas Gerais adopted Law No. 23.291/19 in February 2019 which contained the state’s policy on TSF safety and should be implemented in conjunction with the equivalent federal policy. Among other things, Law No. 23.291/19 determines the criteria for licensing and inspecting TSF structures, prohibits TSFs constructed or heightened using the upstream method and holds management liable for non-compliance with its provisions.
AngloGold Ashanti’s rights and permits
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 pursuant to the Economic Exploitation Plan approved by the ANM and in accordance with the required environmental permits, and as a result do not have an explicit expiry date.
General laws relating to mining and land ownership
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 in time, first in law. Mining activities are regulated by the Colombian 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”.
With respect to land ownership, a mining concession in Colombia does not grant the rights over the surface required to develop a mining project. Therefore, in order to develop a mining project, it is required to acquire and secure access to the land (soil). This can be achieved in several ways, such as (i) purchase of the land, (ii) a transit easement, (iii) a mining easement, and (iv) the special acquisition process or expropriation.
As the sub-soil and the non-renewable natural resources located within the Colombian territory are property of the Colombian State, the Colombian Mining Authority grants the authorization to explore and exploit minerals through a concession contract.
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 or modifications to the timelines. A grant of force majeure is for one year and must be renewed on an annual basis. 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. As a general matter, any company that wishes to obtain a renewal of its concession 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.
In 2013, the federal government instituted the PINES program designed to aid promoting certain projects that are deemed to have a national interest. This designation provides for greater oversight from the national government. All of our three advanced exploration projects (La Colosa, Quebradona and Gramalote) were considered of national strategic interest. Currently, Quebradona and Gramalote remain in the PINES program, but La Colosa was temporarily removed as such (until the force majeure is over).
Tax laws relating to mining
From the moment the concession contract is registered with the Mining Register, the concessionaire has several financial obligations, including the payment of (i) a surface fee during the exploration, construction and assembly stage and (ii) royalties.
Once exploration is complete and the mining infrastructure in place, the concessionaire must begin paying royalties to the Colombian government, consisting of a percentage of the primary product and sub-products being exploited. The percentage of the royalty depends on the regulation in force when the concession contract is signed. In the case of the Quebradona project, the deposit mainly consists of copper followed by gold and silver. There is a 5 percent royalty for copper on the production value at the mine’s or well’s edge (i.e. when extracted from the subsoil). In case of gold and silver, a royalty of 4 percent on the production valued at the mine’s or well’s edge (i.e. when extracted from the subsoil) was established.
Furthermore, Colombian law establishes that once the environmental license is granted the concessionaire must invest 1 percent of the project’s value to benefit the basins covered by the environmental license.
Environmental laws relating to mining
In order to obtain an authorization from the National Environmental Licensing Authority of Colombia to carry out a project, the company must prepare an Environmental Impact Study (E.I.A.) for approval by this authority.
Global 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.
AngloGold Ashanti’s core mining concession contracts provide that the mining authority has the discretion to declare the underlying concession void if the specific company which holds the concession breaches applicable environmental laws or regulations. If the mining authority were to exercise such discretion against it, such company 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 the company would be banned from doing business with the Colombian government for a period of five years. As a result, the company would be unable to conduct any mining exploration or development activities during such period. However, this would not affect other AngloGold Ashanti subsidiaries operating in Colombia, which hold singularly or in concert with joint venture partners the majority of the company’s concession contracts in Colombia.
There are some areas where mining activity is prohibited. These areas are national parks, regional parks, protected forest reserves, paramos (included in Act 1753, introduced in 2015) and wetlands, pursuant to the Ramsar Convention on Wetlands of International Importance. 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.
AngloGold Ashanti’s rights and permits
The La Colosa project managed by AngloGold Ashanti Colombia S.A. (AGA Colombia) remains in force majeure due to the delays in the granting of the environmental permits by the local environmental authority, thereby preventing AGA Colombia from undertaking further exploration activities. The current one-year grant of force majeure will expire on 22 June 2020 and the request for an extension is pending. AGA Colombia applied for a mining area integration (consolidation) of its concession contracts related to La Colosa, in respect of which AGA Colombia was not in compliance with some of the specified timelines. The application for mining area integration (consolidation) was approved in March 2017, which remedied the non-compliance of each consolidated concession and reset the specified timelines. La Colosa now has a single concession which covers a total area of 9,210 hectares and expires on 28 February 2037.
Minera de Cobre Quebradona S.A. (MCQ) which manages the Quebradona project, obtained the integration of concession agreement 5881 in October 2016. As a result, MCQ was granted the exclusive right to explore, take ownership and dispose of the mineral reserves (ore) extracted from the concession area. MCQ has the right to request an extension of up to 30 years, at least two years before the expiration of the operating period. This extension is not automatic, and the request must be filed with new technical, economic, environmental and social studies that demonstrate the status of the mineral resources. Currently, concession contract 5881 is in its third year of the exploration phase and the Quebradona project requested the Mining Authority for an extension of 2 more years.
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 U.S. 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, AngloGold Ashanti (U.S.A.) Exploration Inc. is advancing a joint venture property, the Silicon Project, on federal lands through an Earn-in Option Agreement for 277 mining claims, covering an area of approximately 5,700 acres. Additionally, a further 1,414 mining claims (29,215 acres) in the name of AngloGold Ashanti North America Inc. are also being explored. 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, geophysical surveying 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 CFR § 3809.21. The federal Bureau of Land Management (BLM) issued a Notice of Decision for the Silicon Project approving the proposed exploration operations on 1 November 2017. The BLM determined that the operations would not cause unnecessary or undue degradation as defined under 43 CFR § 3809.5. Three amendments to the Notice of Decision have been authorized by the BLM in letters dated 31 January 2018, 2 April 2018, and 4 October 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 renewable 2-year term from the date of the last amendment to the Notice.
The BLM issued a Notice of Decision for the Rhyolite North Project approving the proposed exploration operations on 14 January 2020. The Rhyolite North Project, situated within the Nye County of south-western Nevada, is wholly owned by AngloGold Ashanti North America Inc. It is an early-stage exploration project managed by AngloGold Ashanti (U.S.A.) Exploration Inc. and is currently comprised of 237 unpatented mining claims.
Nevada’s Bureau of Mining Regulation and Reclamation (BMRR) also regulates mining within the state. Exploration projects of 5 acres or less, the scope of a notice-level operation under federal law, are exempt from BMRR regulation. AngloGold Ashanti’s current exploration programs fall within this exemption.
AngloGold Ashanti (U.S.A.) Exploration Inc. has initiated a subsequent permitting process for the Silicon Project to increase the exploration activities beyond the 5-acre notice level. This process was initiated in 2019 with the completion and submission of the required environmental baseline studies and the submission of a Plan of Operation and Reclamation Plan to the BLM and BMRR. The permitting process is expected to be completed in 2020 and decisions from the BLM and BMRR are expected to be received in the same year.
In Minnesota, AngloGold Ashanti Minnesota Inc. completed early-stage reconnaissance exploration activities to determine the potential for gold mineralization in the northern counties of Minnesota. Based on the achieved results, the company has decided to terminate its exploration activities in the state and it is currently in the process of closing out activities in accordance with state and company requirements.
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 relating to mining. 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 U.S. 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.
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 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 $637 million in 2018 to $730 million in 2019 (including the rehabilitation obligations transferred to held for sale liabilities and associated with our pending sale of operations in Mali and South Africa). This increase mainly relates to proposed requirements regarding the removal of tailings materials from tailings storage facilities in Brazil upon closure and decommissioning (a process known as “decharacterization”) and changes in discount rates based on global economic assumptions. The provisions were also impacted by 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.
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 and greenhouse gases); 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. Environmental laws and regulations applicable to our operations, 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 of, 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 near particular host 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 if discharged to the environment. Water supply, quality and usage are areas of interest 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 our 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 where 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 mined to expose the ore body. Similarly, waste rock is mined 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 facilities. 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 dust generation, breach, leak, or other failure of a waste rock or tailings storage facility (TSF), including any associated dam, 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, negative press coverage, and claims for property or natural resources damages and personal injury by adjacent communities. Incidents at other mining companies’ operations could result in governmental action to tighten regulatory requirements and restrict certain mining activities, in particular with respect to TSFs, also in respect of other mine operators in that region. For example, following the catastrophic failure of a TSF at an iron ore mine owned by Vale in the state of Minas Gerais in Brazil in January 2019, tailings were discharged into the mine’s administrative area and part of the local community, reportedly resulting in deaths and injuries to hundreds of people. As a result of this incident, there has been considerably increased regulatory scrutiny in Brazil and other areas on mining operations generally, and the requirements applicable to the approval, licensing, construction, management, closure and decommissioning of TSFs have generally become far more stringent. In particular, in Brazil, new TSFs in the upstream design method have been prohibited by the Brazilian National Mining Agency (ANM) and decommissioning of all existing upstream TSFs has been ordered. As a result, we will be required to reinforce, and decommission by February 2022, the TSF at our Serra Grande mine, located in the state of Goiás. The incremental costs for reinforcing the walls of this facility and, ultimately, for decommissioning and closing the TSF in compliance with new legislation, are likely to be material. We will also be required to reinforce or decommission all TSFs in Brazil constructed based on the downstream design method by 2025. Moreover, a bill currently pending in the National Congress in Brazil would require all tailings materials to be removed from the TSF (a process known as “decharacterization”) in connection with closure and decommissioning. If passed, the additional costs associated with decharacterization are likely to be material to AngloGold Ashanti. Finally, the suspension of environmental licensing permit processes for TSFs in the state of Minas Gerais has delayed approval processes with respect to our operating permits, and may compromise our production plans in respect of our Minas Gerais operations. Further and more substantial amendments to the regulatory requirements in Brazil governing such TSFs and related dams are anticipated in 2020. See “Item 4B: Business Overview-The Regulatory Environment Enabling AngloGold Ashanti to Mine”.
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, which includes AngloGold Ashanti’s operations. 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. In addition, in the West Wits district, after Blyvooruitzicht Gold Mining Company was placed in provisional liquidation in August 2013, AngloGold Ashanti purchased from Blyvooruitzicht the rights of access to the 4 and 6 shafts as well as the relevant infrastructure to continue pumping underground water. We subsequently transferred the assets and rights to a newly incorporated subsidiary Covalent Water Company and, in November 2014, obtained a directive from the Department of Water and Sanitation 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 (GHGs) are emitted directly by AngloGold Ashanti’s operations, as well as by external utilities from which AngloGold Ashanti purchases electricity.
As a result of commitments made at the UN Climate Change Conference in Durban, South Africa in December 2011, certain members of the international community negotiated a treaty at the Conference of the Parties of the UN Framework Convention on Climate Change in Paris in December 2015 (Paris Agreement). The Paris Agreement, which came into force on 4 November 2016, requires developed countries to set targets for emissions reductions. Additional measures designed to limit or reduce GHG emissions, both mandatory and voluntary, may be implemented at national or international levels in various countries.
For example, in South Africa, the Carbon Tax Act, No. 15 of 2019, imposing a tax on carbon dioxide equivalent of GHG emissions, took effect on 1 June 2019. The tax will be implemented in a phased manner, taking into account South Africa’s Nationally Determined Contributions (NDCs) commitment under the Paris Agreement to reduce greenhouse gas emissions. The first phase, which runs from June 2019 to December 2022, imposed a tax of ZAR120/ton carbon dioxide equivalent (CO2-e) of direct GHG emissions, which will increase by CPI plus two percent up to 2022 and in line with inflation thereafter. As this first phase is designed to be revenue-neutral in terms of its aggregated impact, a system of rebates is in place effectively reducing the actual rate to be in a range of ZAR6/ton to ZAR48/ton.
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, including for those costs or taxes passed on by electricity utilities which supply the company’s operations. AngloGold Ashanti could also 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 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 Commonwealth Government introduced the Safeguard Mechanism (Rule 2015) through the existing National Greenhouse and Energy Reporting (NGER) scheme, to provide a framework for Australia’s largest emitters to measure, report and manage their emissions. It does this by encouraging large facilities, whose net emissions exceed the safeguard threshold, to keep their emissions at or below emissions baselines set by the Clean Energy Regulator. The safeguard mechanism applies to facilities with Scope 1 covered emissions of more than 100,000 tonnes of CO2-e per fiscal year. The Australian mining operations (Sunrise Dam and Tropicana) had emissions baselines set in 2016 for a 3-year period (expired in 2019) which were reported annually through the NGER scheme. During the 2018/19 fiscal year, Tropicana’s emissions were within its authorised threshold and Sunrise Dam was required to purchase offsets for emissions that were 0.8% above its safeguard threshold, the cost of which was immaterial. The Australian mining operations are in the process of re-calculating their respective emissions baselines in 2020 to comply with the changes in Rule 2015 which adopt government-determined prescribed production variables.
In addition to more stringent requirements and commitments, AngloGold Ashanti’s operations are subject to a number of physical risks from climate change, such as changes in rainfall rates or patterns resulting in floods or droughts, rising sea levels, reduced water availability, higher temperatures and extreme weather events. Such events or conditions, particularly including 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.
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.
Throughout the year we have continued to improve our safety performance across our global operations, which remains a top priority for AngloGold Ashanti. We pursue and continually adapt strategies in line with recognised leading practice in global safety standards and systems in working towards our 2030 goal of providing workplaces free of injury and harm for our employees and contractors. Our progress to date is the cumulative result of numerous interventions over several years, including the development of our 2015 strategy, which designed with the input of operating teams across our business as well as representatives from the Executive Committee, management and employees. To ensure that our strategy remains relevant and focused, we reassess its look at risk management, technology and innovation, leadership, people and work processes. We also adhere to global standards
and are rolling out ISO 45001:2018, which has replaced the OHSAS 18001:2007 series. All our sites are currently OHSAS 18001:2007 certified and three operations, Sunrise Dam, Siguiri and Geita, have already converted to the ISO 45001:2018 standard.
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 centres 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.
In 2019, the Johannesburg High Court approved the settlement of existing silicosis and tuberculosis class actions against AngloGold Ashanti and other gold mining companies in South Africa. Please refer to “Item 8A: Consolidated Financial Statements and Other Financial Information-Legal Proceedings-South Africa-Silicosis and tuberculosis litigation”.
In addition to OLD, AIDS and associated diseases remain major health care challenges faced by AngloGold Ashanti’s South African operations. 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 counselling 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: 2019
Operations and projects
|AMERICAS||CONTINENTAL AFRICA||SOUTH AFRICA|
Cerro Vanguardia (92.5%)(1)
Percentages indicate the ownership interest of AngloGold Ashanti. All operations are 100%-owned unless otherwise indicated.
|Sale process ongoing (at an advanced stage).|
|In 2019, the company’s joint venture partner’s, B2Gold Corp, minority shareholding was converted to a share of profits. Likely to be a copper mine producing gold and silver as by-products.|
|Agreement and sale announced December 2019.|
|Obuasi's redevelopment project began in 2019.|
|Kibali and Morila are managed and operated by Barrick Gold Corporation (Barrick).|
|Agreement and sale announced post year end in February 2020.|
AngloGold Ashanti, an independent, global gold mining company with a globally diverse, high-quality portfolio of operations and projects, is headquartered in Johannesburg, South Africa. Measured by production, AngloGold Ashanti is the third largest gold mining company in the world.
Our portfolio of 14 operations in nine countries excluding our South African assets and Sadiola mine which are held for sale, includes long-life operating assets with differing ore body types located in key gold-producing regions around the world. These operating assets were supported by three greenfields projects in a tenth country (Colombia) and a focused global exploration programme.
Our operations and projects are grouped into the following regions: Continental Africa, South Africa, Americas and Australia.
The most significant project milestone achieved during the year was the pouring of first gold at the Obuasi Mine in Ghana on 18 December 2019, bringing Phase 1 of the Redevelopment Project to a conclusion on time and within budget.
Processes to sell assets in Mali, South Africa and Argentina progressed during the year. On 23 December 2019, the Company announced that it had reached an agreement to sell its interest in the Sadiola Mine, and on 12 February 2020, the Company announced that it had reach an agreement with Harmony Gold Mining Company Limited to sell all its remaining South African producing assets and related liabilities. In Argentina, the sales process related to Cerro Vanguardia continues.
AngloGold Ashanti’s operations and joint ventures employed, on average, 34,263 people (including contractors) in 2019 (2018: 44,249). The 23% decrease in employees is mostly due to the reduction of employee numbers in the South Africa region as a result of the restructuring of the South African operations in 2019.
Performance (including discontinued operations)
In 2019, AngloGold Ashanti produced attributable 3.3 million ounces (Moz) of gold (2018: 3.4Moz) as well as 3.7Moz of silver and 199 tonnes of sulphuric acid as by-products.
Production of 3.3 Moz of gold was achieved at a cost of sales of $3.1 billion and an all-in sustaining cost of $ 1,034/oz for subsidiaries and $767/oz for equity accounted joint venture operations compared to a production of 3.4Moz in 2018 at a cost of sales of $3.2 billion and all-in sustaining cost of $1,000/oz for subsidiaries and $820/oz for equity accounted joint venture operations.
The AngloGold Ashanti gold Ore Reserve reduced from 44.1Moz in December 2018 to 43.8Moz in December 2019. This gross annual decrease of 0.3Moz includes depletion of 3.7Moz. The increase after depletions of 3.4Moz, results from additions due to exploration and modelling changes of 3.6Moz, changes in economic assumptions of 0.4Moz and a change in ownership of 0.1Moz. Other factors resulted in a 0.7Moz reduction.
The AngloGold Ashanti copper Ore Reserve increased from 1.26Mt (2,769Mlbs) in December 2018 to 1.39Mt (3,068Mlbs) in December 2019. This gross annual increase of 0.14Mt includes an increase of 0.07Mt due to methodology and 0.07Mt due to change in ownership from 94.876% to 100% as B2Gold’s shareholding has been converted to a share of profits.
Capital expenditure, including equity accounted joint ventures, in 2019 amounted to $814 million (2018: $721 million).
There were no fatalities across the group’s operations in 2019. The all injury frequency rate was 3.31 per million hours worked compared to 4.81 in 2018. Regrettably, there have been four fatalities across the group’s operations post year-end resulting from a seismic event as well as a tramming accident at the Mponeng mine in South Africa.
AngloGold Ashanti had seven mines in the region during 2019, four of which are currently in operation and two treating tailings. The redevelopment of the Obuasi mine in Ghana began in 2019 and first gold was poured in December 2019. The sale of Sadiola was announced on 23 December 2019.
Attributable gold production
Average number of
|Attr. Siguiri 85%||213||3,056|
|Joint venture operations|
|Democratic Republic of the Congo|
|Attr. Kibali 45%||366||2,239|
|Attr. Morila 40%||27||354|
|Attr. Sadiola 41%||51||346|
Continental Africa - Key Statistics
|Gold production (attributable)||000oz||1,094||1,060||1,093|
|Cost of sales||$m||1,173||1,127||1,071|
Total cash costs (1)
All-in sustaining costs (1)
|Number of fatalities||0||0||0|
|AIFR||Per million hours worked||0.62||0.51||0.28|
|Average no of employees: Total||12,847||11,490||10,268|
(1) Includes Obuasi gold production in 2019, capitalised as part of the project development.
|Joint venture operations|
|Gold production (attributable)||000oz||445||452||360|
|Cost of sales||$m||428||480||441|
Total cash costs (1)
All-in sustaining costs (1)
Number of fatalities(2)
|Per million hours worked||0.65||0.29||1.25|
|Average no of employees: Total||2,939||3,343||3,325|
|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-Non-GAAP analysis”.|
|(2)||Excludes Morila and Kibali which are managed by Barrick and not AngloGold Ashanti.|
Production and costs
Production from the Continental Africa region subsidiaries increased to 1.094Moz in 2019 compared to 1.060Moz in 2018. The joint venture operations decreased production to 445Moz compared to 452Moz in 2018. The increase was largely due to record production at Iduapriem, and good performance at Geita.
Gold production at Iduapriem was 8% higher at a record 275,000oz compared to 254,000oz in 2018, primarily a result of a 14% improvement in plant feed. The grade improvement was driven by better grade control and access to Cut 1 area in the Teberebie pit where stripping commenced in 2017. Production was impacted by a 5% year-on-year decline in tonnage throughput due to lower plant availability owing to an unstable power supply from the national grid in the first half of the year and mill downtime in the last quarter of the year to repair a cracked trunnion journal on Sag Mill 2. The power supply challenge has since been resolved by changing over to Volta River Authority (VRA) and Ghana Grid Company.
Geita produced 604,000oz in 2019, the highest level in 13 years, 7% higher compared to 564,000oz in 2018. The operation is transitioning to predominantly underground operations, with a 10% increase in recovered grades achieved on the back of additional flexibility in the blending strategy resulting in improved recovery rates. Record quarterly production of 208,000oz was achieved in the last quarter of the year, largely a result of the higher volumes of tonnes treated and higher-grade material from Star & Comet Cut 3.
Production at Siguiri declined 12% to 213,000oz in 2019. This compares with production of 242,000oz in 2018. The lower production was mainly due to lower plant feed grade and recovery which is related to the ROM 3 crushing plant low performance and material feed blend to the plant. This was a result of a slower ramp-up than anticipated following the completion of the carbon-in-leach (CIL) combination plant integration during the year. By year-end, quarterly production had improved as the processing challenges from the treatment of harder rock material through the plant had been addressed.
At Kibali, production increased 1% to a record of 366,000oz in 2019 (2018: 363,000oz), a result of the ramp up in underground mining, which partially offset the 9% decrease in tonnes treated due to the planned reduction in open pit mining. The mine delivered higher volumes of underground tonnes as the shaft operated in line with design specifications for the full year. Total volume of undergound ore hoisted was 15% higher year-on-year.
Sadiola continued to process the stockpile and optimise costs, producing 51,000oz in 2019. This compares to 59,000oz in 2018, a 13% decrease. The end of mining activities and the depletion of full grade ore stockpiles in 2018 led to a higher proportion of marginal grade ore from the stockpiles being fed to the plant in 2019.
Morila’s production decreased 8%, as planned, to 27,000oz in 2019 compared to 30,000oz in 2018, following the completion of satellite pit mining at the start of the first half of the year. Production was also impacted by a 16% decrease in recovered grade as the mine continued to treat tailings material. This was partially offset by a 9% increase in tonnes treated compared to the previous year. The mine is expected to continue treatment of mineralized waste ore, augmented by higher grade ore from targeted mining areas, for the next year, after which the mine will transition to full closure.
Cost of sales and all-in sustaining costs (AISC) for the subsidiary operations in the region increased to $1,173 million and $947/oz for 2019, respectively, a result of higher operating costs due to lower production at Siguiri, offset by lower costs at Geita following the transition to underground mining, as well as cost savings achieved from reagent optimisation at both Geita and Iduapriem. Cost of sales and AISC for the joint venture operations decreased due to lower operating costs at Sadiola and Morila as they wind down operations.
The drive for continuous cost improvements through the Operational Excellence programme is well entrenched across all sites and disciplines in the region. The focus remains on delivering systemic and sustainable operational improvements in the management of the region’s stay-in-business projects.
Total capital expenditure for the region increased in line with planned inward investment in growth projects, particularly at Obuasi where $246 million was spent in the redevelopment of the project. Underground Ore Reserve development projects continued at Geita, for Star & Comet and Nyankanga, and at Obuasi. These projects will provide access to ore bodies identified for future gold extraction. The balance of the capital spend was used for capitalised exploration and stay-in-business projects to improve asset reliability across our mines to ensure safe, risk-free mining and production.
There were no fatalities in the Continental Africa region in 2019, with the last fatal injury having been recorded in October 2015. The region saw a regression from the previous year, primarily due to an increased number of injuries associated with the redevelopment project currently underway at Obuasi in Ghana.
The total attributable Continental Africa Region Ore Reserve was 17.93 million ounces (2018: 16.33 million ounces). This amounts to 41 percent of the group’s Ore Reserve.
Growth and improvement
Commissioning of the Siguiri CIL combination plant was completed in 2019 with the mill achieving design throughput consistently. Optimisation of the circuit is now underway. The pre-feasibility study was completed for Block 2 Project, and it is expected that the feasibility study will be completed by end of the second quarter in 2020. Evaluation of Siguiri Block 2 and the trucking of oxide material to the existing process plant to displace marginal ore was completed. The aim is to improve the mine’s ounce profile and potentially extend its life of mine. Permits for construction of the new haul road have been received and the mining permit application is currently in progress.
At Geita, the development of Nyankanga Block 1 Portal began in December 2019 to accelerate mining in Blocks 1 and 2 following the delay in permitting for Geita Hill.
Development of Geita’s Star & Comet and Nyankanga underground operations continued during the year. Approximately 4,568m of development was completed during the year to access new areas for stope mining and further exploration. Open pit mining at Nyankanga will reach the end of its economic life during 2020. Surface exploration continued at Selous, a satellite pit 2.4km from Star & Comet, to supplement the underground operation in the near term.
At Iduapriem waste stripping for Teberebie Cut 1 was completed and ore was mined from Teberibie Cut 1, Cut 3, Ajopa and Block 3. Stripping in Cut 2 is expected to start during the first half of 2020 to deliver ore in 2021 when Cut 1 ore is depleted. Brownfields drilling continued at the Ajopa pit and open pit mining has been extended to Cut 3 to supplement ore from the larger Teberebie pit. Major brownfield exploration drilling continued at Blocks 7 and 8, Ajopa and Block 1 to improve the mine’s future ounce profile and potentially extend the life of mine.
The pre-feasibility studies for the new tailings storage facility (TSF) and return water dam (RWD) sites were completed. A related feasibility study is planned to be completed in 2020. Construction sites were identified and land access compensation and engagement with the relevant government authorities began for the permitting of the new facilities. In the second half of 2019 the mine undertook a feasibility study to consider treatment options to discharge excess water efficiently on the current greenfield tailings storage facility, the completion of which is expected in 2020.
The Obuasi Redevelopment Project has progressed well. There is a strong focus on safety. The project remains on schedule and within budget. Phase 1 of the project, which set up the plant to achieve a daily processing rate of 2,000t of ore, was completed. Phase 2, which aims to expand plant capacity to 4,000t a day, will continue through 2020. The civil engineering work is progressing well with most orders having already been placed. First blast underground, signalling the start of underground development, took place on 11 February 2019 and the first stope blast was in October 2019. This indicated the start of ore production, albeit on a limited scale, and was followed by the first pour of gold on 18 December 2019, demonstrating the successful implementation of the plan to redevelop Obuasi into a modern, mechanised mining operation, following the suspension of mining activities five years ago.
At Kibali, the Kalimva-Ikamva prefeasibility study was completed, delivering another viable opencast project. This will help balance the mine’s open cast/underground ore ratio and enhance mine plan flexibility. Drilling at Gorumbwa highlighted future underground potential and ongoing conversion drilling at KCD is delivering reserve replenishment. The mine is well placed to meet its 10-year production targets and extend them beyond this horizon.
After extensive restructuring of this region, at 31 December 2019, the region has two operations:
West Wits: Mponeng
Post-year end, on 12 February 2020, it was announced that an agreement had been reached to sell all our remaining South African producing assets and related liabilities to Harmony Gold Mining Company Limited. The transaction, which is subject to several conditions precedent, is expected to be concluded on or about 30 June 2020.
Average number of
1. West Wits
2. Surface operations (1)
|Includes MWS for purposes of this annual 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||479||590||1,129|
Total cash costs (3)
All-in sustaining costs (3)
|Number of fatalities||0||2||7|
|AIFR||Per million hours worked||10.00||10.25||12.68|
|Average no of employees: Total||6,975||17,308||26,245|
|Refers to underground operations only.|
|Includes production ounces from the technology development programme in 2017.|
|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-Non-GAAP analysis”.|
Production and costs
The South Africa region produced 419,000oz, 14% lower than the previous year, at a cost of sales of $479 million and a total cash cost of $981/oz in 2019, largely due to limitations in face length availability which impacted grades following high seismicity at Mponeng. Production was also impacted by intermittent electricity due to Eskom load shedding and seismicity related safety stoppages.
Mponeng mine produced 244,000oz at a cost of sales of $287 million and a total cash cost of $976/oz in 2019, an 8% decrease in production compared to 265,000oz at a cost of sales of $320 million and a total cash cost of $977/oz in 2018. The 2019 year marked the first full year in which shift arrangements at Mponeng were implemented.
The shift arrangement represents a paradigm shift in the evolution of the mine. This has resulted in significant improvements in both safety and productivity. Employees have responded positively to the new schedule, resulting in a 36% year-on-year improved safety performance (AIFR) and a 15% uplift in productivity.
Production of 175,000oz at Surface Operations improved for the year driven by a 3% increase in production at MWS, driven by improved recoveries with the introduction of the Aachen Shear reactor and other initiatives aimed at enhancing efficiencies.
The main drivers for the improved delivery at the Surface Operations were primarily:
|•||Improved throughput from better operational performance delivery by the contractor; stabilised duty cycle of the communication circuits|
|•||A change in strategy to process Mponeng marginal ore dumps (MOD) through the Savuka gold plant;|
|•||General metallurgical process efficiencies; and|
|•||Implementation of grid sampling and grade profiling strategy.|
The impact of inclement weather remained significant during 2019. A remote reclamation project is currently underway with the aim of reducing inclement weather disruptions to production. The current situation at Eskom also remains a concern as MWS is not able to fully function on emergency power and therefore any interruptions caused by Eskom directly impacts on production activities.
Costs benefitted from operating efficiencies as well as a weaker rand/dollar exchange rate, resulting in a 19% year-on-year decrease in cost of sales and a 5% year-on-year decrease in total cash cost. This was partially offset by lower gold output from the region.
Cost reduction initiatives aimed at calibrating both on- and off-mine cost structures progressed well through the year in line with our focus on Operational Excellence.
All-in-sustaining costs for the region were $1,132/oz (cost of sales $479 million), down 4% despite the headwinds related to production and inflationary pressures. The region successfully delivered on its targeted cost savings initiatives for 2019.
Through our Operational Excellence initiatives, cost and capital management remained a key priority as we continue to maintain asset integrity and safety performance. Project initiatives include a wide array of activities aimed at improving metallurgical recoveries and throughput and cost saving initiatives. Operational Excellence began at Mponeng in 2019 and included working to increase face length availabilities, improve recovery and mine call factors, reduce power consumption, and optimise capital spend.
Total capital expenditure for the region was $57 million, compared to $73 million in 2018. This was mainly spent on the completion of the Phase 1 project, ore reserve development (ORD) work, as well as the Mponeng life-of-mine extension feasibility study. Sustaining capital expenditure was spent on a variety of stay-in-business projects and the rehabilitation work related to the Carbon Leader project.
There were no fatalities in the South Africa region in 2019, the region’s safest year on record. The AIFR was10.00 for the year, an improvement year-on-year. Safety interventions have included changes in planning and information systems, the introduction of a new way of mining, and a change in shift arrangements as of November 2018. Regrettably, there have been four fatalities in the South Africa region post year-end resulting from a seismic event as well as a tramming accident at the Mponeng mine.
As at 31 December 2019, the total Ore Reserve for the South African region was 15.5Moz (2018: 16.8Moz). This is equal to 35 percent of the Group’s Ore Reserve.
The Americas region has three mining operations, featuring both open pit and underground mining (one in Argentina and two in Brazil) as well as two advanced greenfields projects in Colombia.
Attributable gold production
Average number of
|Cerro Vanguardia (Attr. 92.5%)||225||1,698|
Americas - Key Statistics
|Gold production (Attributable)||000oz||710||776||840|
|Cost of sales||$m||822||838||987|
Total cash costs (1)
All-in sustaining costs (1)
Capital expenditure (2)
|Number of fatalities||0||1||0|
|AIFR||Per million hours worked||3.50||3.97||3.29|
|Average no of employees: Total||8,114||7,973||8,511|
|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-Non-GAAP analysis”.|
|100 percent, (not attributable) and includes Colombia.|
Production and costs
Total production for the Americas region in 2019 declined 8% to 710,000oz compared to 776,000oz in 2018, a result of production declines at all three operations.
At AGA Mineração, performance at Cuiabá was hindered by poor ground conditions where, to ensure safe production, the rate of mining was slowed while a new surface support regime and mining sequencing were explored. Leading internal and external rock engineering experts were engaged to advise and subsequently mesh surface support installed to rehabilitate accessways and new controls and mine sequencing were introduced. Early indicators show these new controls to be successful and condition monitoring will continue as mining progresses in the deeper, higher grade areas.
At the Córrego do Sítio complex, geological model changes, open pit licence delays for the Rosalino orebody, geotechnical issues and unexpected heavy rains in the last two months of the year delayed development and mining of the planned open pit mining areas.
At Serra Grande, the slightly lower production level in 2019 was due to lower feed grades, particularly in the second half of the year, and reduced drilling productivity and fleet availability. This was partially offset by higher tonnage treated following the Mina III pushback.
Cerro Vanguardia’s production was negatively affected in the second half of the year by the planned lower grades mined and a 42% decline year-on-year in silver production. This was partially compensated for by higher average silver price.
Cost of sales for the region for the year were $822 million in 2019 (2018: $838 million). The total cash cost for the region for the year was $736/oz in 2019 (2018: $624/oz) and AISC were $1,032/oz (2018: $855/oz). The increased costs were largely due to the decline in ounces sold, reduced silver by-product revenue from Cerro Vanguardia and inflation. The inflationary pressures which affected both Argentina and Brazil, included increases in wages, operational materials, this coupled with impact of changes in the estimation of rehabilitation provisions estimation for the Brazilian operations as required by the new legislation. This was slightly offset by weaker currencies (Argentinean peso and Brazilian real).
Total capital expenditure for the region was $195 million, compared to $176 million in 2018, with the increase largely driven by higher spend in Colombia on feasibility study work at Quebradona. Sustaining capital expenditure was spent mainly on Ore Reserve development at underground operations in Brazil and Argentina. At Cerro Vanguardia, capital expenditure for the year was spent primarily on development work and larger trucks to increase hauling and loading capacity, and to ultimately improve productivity.
Serra Grande is our only operation in Brazil with an upstream TSF. Following implementation of new legislation in Brazil, the current dam, which has a reinforced wall, will be converted to dry stacking. As this was part of the mine plan, the process will be accelerated and decommissioning is expected to begin in September 2021.
There were no fatalities in the Americas region in 2019. Safety improved overall with an AIFR of 3.84 recorded for the year.
At the end of 2019, the total attributable Ore Reserve for the Americas region was 7.2 million ounces (2018: 7.1 million ounces). This is approximately 17 percent of the group’s total Ore Reserve.
Growth and improvement
In Brazil, the strategy is to enhance mining flexibility and predictability by investing in Ore Reserve development, along with Mineral Resource and Ore Reserve conversions. More brownfields exploration is planned to increase reserves and related confidence levels. This work will be vital in the upcoming year.
During 2019, Serra Grande transitioned to full owner development and development metres achieved increased by 10% compared to 2018 levels. At Cuiabá a new international contractor in the Brazilian market was signed on in March 2019 and has to date delivered a 28% year-on-year increase in metres developed.
Cuiabá is also investigating the potential of new orebodies and a plan for deepening the mine. At Córrego do Sítio (CdS) the focus is to re-open the CdS II underground mine. Along with a focus on resource conversion and stabilising production, Córrego do Sítio will invest in looking at the potential of CdS III and the Rosalino open-pit expansion.
At Serra Grande, Palmeiras South underground mine is expected to commence delivering ounces in the first half in 2020.
In Argentina, Cerro Vanguardia, which has been in operation for over 20 years, is expected to see a reduction in grades from the open pit mines and lower contributions from silver compared to the previous years’ levels. To sustain the production plan, exploration will focus on converting new and already existing blue sky tangible and Inferred Resources into Indicated category around current pits and underground operations in the main production zone. The exploration plan includes 25,000m of diamond drilling hole campaign, channels, trenches and geophysics surveys, among others.
Attributable gold production
Average number of
|1. Sunrise Dam||254||570|
|2. Tropicana 70%||360||570|
AngloGold Ashanti’s Australian assets comprise the wholly owned Sunrise Dam and the 70 percent-owned Tropicana Gold mine located in the north-eastern goldfields of the state of Western Australia.
Australia - Key Statistics
|Gold production (attributable)||000oz||614||625||559|
|Cost of sales||$m||632||622||551|
Total cash costs (1)
All-in sustaining costs (1)
|Number of fatalities||0||0||0|
|AIFR||Per million hours worked||7.33||9.14||8.53|
|Average no of employees: Total||1,140||1,051||974|
Production and costs
The Australia region produced 614,000oz in 2019 compared to 625,000oz 2018. The 2% drop in year-on-year production was largely the result of lower underground mined volumes and grades at Sunrise Dam. Sunrise Dam experienced operational challenges in the middle of the year with limited stope flexibility and paste fill delays, which resulted in lower underground volumes and grades. However, mining flexibility improved in the fourth quarter of 2019 as larger stopes came online, resulting in a record production from underground for the fourth quarter. A substantial exploration programme is underway to increase Mineral Resource confidence, grow the underground Ore Reserve and support development of additional mining areas in the long term. Critical for success at Sunrise Dam is increasing flexibility to ensure consistently high underground tonnages are available to displace lower-grade surface stockpiles. Strategic drill platforms have been established to facilitate systematic exploration of the down plunge extents of the Vogue mineralised system, while also testing areas to the north and south that could generate additional work areas. The objective of the drilling is to provide data to facilitate Ore Reserve conversion and increase confidence and reliability in the two- to five year planning horizon.
At Tropicana, production at 360,000oz for the year, was 7% higher year-on-year. Higher mill throughput, which set new records in December 2019, offset lower feed grades in the second half of the year and contributed to the increase in gold production. Annual tonnes mined also broke site records in 2019. The Tropicana open pit was completed during the year and mining continued in the Havana South, Havana and Boston Shaker pits. It is planned that open pit mining will be focused on the Havana pit in 2020.
The region’s cost of sales and AISC were $632 million and $990/oz in 2019, respectively, compared to $622 million and $1,038/oz for 2018, respectively. Despite the 2% lower production delivered in the region for the year, a strong focus on operational excellence coupled with a weaker exchange rate contributed to a 4% drop in total cash costs and a 5% drop in AISC compared to 2018. Tropicana’s total cash costs declined due to higher volumes, and improved efficiencies partially offset by unfavourable grades, royalties and inflation while total cash costs at Sunrise Dam were negatively impacted by lower efficiencies, lower grade and inflation. Operational excellence work included a successful trial of autonomous open-pit blast hole drilling, which indicated significant productivity gains could be achieved by converting all six drill rigs to autonomous operation. Autonomous operation can improve drill use by enabling their continued operation within the exclusion zone during blasting, so extending drill bit life and reducing the number of operators needed.
Total capital expenditure for the region was $149 million in 2019 compared to $156 million in 2018. Capital expenditure at Tropicana increased by $29 million predominately due to the start of the Boston Shaker underground growth project ($21 million). An increase in waste stripping capital expenditure due to the scheduling of open pit cutbacks was partially offset by a reduction in stay-in-business capital. Capital expenditure at Sunrise Dam reduced by $35 million due to lower Ore Reserve development and stay-in-business capital expenditure. Several key infrastructure projects, such as the expansion of the tailings storage facility and the upgrade to the ventilation system were completed in 2018 resulting in a $25 million year-on-year reduction in stay-in-business capital expenditure when compared to 2019.
Safety performance improved for the Australia region in 2019, continuing a positive trend since the commissioning of Tropicana in 2013. At Tropicana, the site ended the year with a record safety performance in terms of the AIFR and the lost-time injury frequency rate (LTIFR), achieving 14 months without a lost-time injury. At Sunrise Dam, the AIFR and LTIFR both increased marginally from 2018, although the severity of injuries was minor.
At the end of 2019, the total attributable Ore Reserve for the Australia region was 3.2 million ounces (2018: 3.8 million ounces). This is approximately seven percent of the group’s total Ore Reserve.
Growth and improvement
At Sunrise Dam, the underground exploration programme initiated in the second half of 2019 is expected to take two years. The programme is designed to increase Mineral Resource confidence, grow the underground Ore Reserve and support development of additional mining areas in the long term. By the end of the year six underground diamond drill rigs were in operation testing various targets including the southern strike extensions of the Midway Shear Steeps (MSS) and Elle and areas to the south of the current Vogue Indicated Resource. Surface diamond drilling will target southern extensions of Vogue.
Drilling results returned in 2019 identified extensions of Vogue mineralisation over an approximate 180m strike length; southern extensions to the Midway Shear (MWS) Steeps ore domains, approximately 190m south of the current Indicated Resource; and potential repetition of the MWS Steeps ore domains, approximately 100m east of the current Indicated Resource. Drilling also intersected mineralisation 500m to the south down plunge of the Mineral Resource, suggesting the continuation of the Vogue orebody.
Development of the Boston Shaker underground mine at Tropicana began in May 2019 and at year-end the project was on track to deliver high-grade ore in mid-2020 as planned. The decision to go ahead with the project was announced in March 2019 following board approval and after a feasibility study confirmed that underground mining was technically and financially viable, demonstrating robust economics with an anticipated internal rate of return of 39% for a capital investment of $79.3 million.
Boston Shaker is expected to contribute higher-grade mill feed, resulting in an improved gold production profile and enhanced cash flow, during 2021-2023 when the mine plan includes periods of higher waste stripping in the Havana open pit.
The feasibility study was based on the mining of 6.58 million tonnes, grading 3.84g/t, assuming the systematic conversion of Mineral Resources to Ore Reserves over the life of the mine. The average underground mining rate will be approximately 1.1Mtpa (including development) over an eight-year mine life to 2026 to produce a total of 732,000oz. Mining methods will comprise conventional mechanised mining and underhand sublevel open stoping.
The two raised bore holes required for ventilation and emergency egress were tracking ahead of schedule by year end, and underground development of 1,640m was ahead of plan. Underground reverse circulation grade control drilling began in October. Recruitment of the underground workforce is progressing as planned and the underground operation remains on track to deliver first gold in the second half of 2020. Operational excellence work is focused on remote bogging, the mechanical operator-controlled digging of ore from surface, and on optimising level spacing and extraction ratios.
Our exploration is focused on two of our strategic focus areas: creating value by providing long-term optionality and improving portfolio quality. Our exploration programme covers greenfields and brownfields exploration.
These strategic objectives are met by:
Greenfields exploration which aims to discover large, high-value Mineral Resource, which will eventually lead to the development of new gold mines; and
Brownfields exploration which focuses on delivering value through accretive additions to the Ore Reserve at existing mines as well as new discoveries in defined areas around 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 innovation in geological modelling and mine planning, and continual optimisation of our asset portfolio.
In 2019, $62 million was spent on greenfields exploration and $95 million on brownfields exploration.
5,500km2 of highly prospective ground was explored in two countries – Australia and the United States – along with licence applications and other ground positions in Argentina,Brazil and Tanzania. In total, more than 71km of diamond, reverse circulation (RC) and aircore (AC) drilling was completed in 2019.
In Australia, in the Laverton district, AngloGold Ashanti completed the 70% earn-in at the Butcher Well and Lake Carey JV. The Butcher Well scoping study was updated by integrating the drilling results from the second half of 2018. Elsewhere in Laverton, a total of 49,200m of aircore drilling and 4,486m of diamond drilling was completed on several joint venture and non- joint venture projects.
Diamond drilling programmes were also completed at the Mt Clark prospect in North Queensland (nine holes for 2,748m) and the Glandore prospect, located 60km east of Kalgoorlie in Western Australia (six holes for 1,846m), with no positive results derived.
In the United States, at the Silicon project in Nevada, 8,008m of RC and 3,300m of diamond drilling were completed in 2019. The programme followed up on and further developed understanding of the alteration system intersected in earlier drilling as well as testing other favourable litho-structural targets within the Silicon-Thompson structural corridor. An induced polarization (IP) survey was also completed along with ground magnetic and gravity surveys. The second-year anniversary payment was made to Renaissance Gold during the period to maintain the option earn-in agreement into the third and final year in 2020.
Also in the United States, in Minnesota, roto-sonic drilling was completed over several target areas with 54 holes completed for a total of 1,619m. Since the results from the programme were not encouraging, work has stopped. AngloGold Ashanti returned all the mineral leases to the state of Minnesota.
In Argentina and Tanzania, exploration properties are on care and maintenance. Target generation activities were completed in Brazil and West Africa.
Brownfields exploration was carried out in nine countries in and around AngloGold Ashanti operations. A total of 877,630m of Diamond and RC drilling was completed during the year.
South Africa: Exploration continued with one-hole drilled at Mponeng’s Western Ultra Deep Levels targeting the Ventersdorp Contact Reef. Drilling was stopped due to capital constraints and the final site clearance/closure certificate signed off in June.
Argentina: At Cerro Vanguardia, due to budget constraints, exploration was focused on mapping, surface sampling and ground geophysical surveys.
Brazil:At AGA Mineração, in the Iron Quadrangle, a total of 263,345m was drilled. At Cuiabá, the underground drilling programme focused on Fonte Grande and Serrotinho (upright limb), Balancão and Galinheiro (overturned limb). A long-inclined borehole drilling project was successfully completed. Positive results with significant intercepts were reported for secondary targets including the quartz vein project (VQZ) and Viana.
Regionally, drilling at the Descoberto target is ongoing and has produced encouraging observations. Land access was granted in October 2019 to allow the Matarelli target drill programme to commence. A trial unmanned aerial vehicle (UAV) magnetic survey was successfully completed at Matarelli and a more comprehensive survey covering the Matarelli and Tinguá targets is planned. A detailed geological map and associated cross sections were produced over the Tinguá target area ahead of a geochemical soil
programme planned for early 2020.
At Lamego, drilling focused on confirming the continuity of Carruagem in a south-westerly direction (both limbs) from levels 1 to 5. Drilling also took place at Cabeça de Pedra (hinge zone), which reported high grades and indicated that the orebody remains open.
Drilling at Córrego do Sítio (CdS) tested the Rosalino open pit. At CdS I, underground drilling in Laranjeiras and Carvoaria confirmed the Mineral Resource and indicate good prospectivity for high grades in Carvoaria. In the ‘Gold Quadrangle’ area of Candeias-Cristina, Mutuca, Cachorro Bravo and Pneu, drilling supported Mineral Resource additions in the area.
At CdS II, drilling in the shallow north-east portion of São Bento confirmed the continuity of the mineralised structure in that direction. The Remaining Ounces project identified potential areas for high-grade ore within old mining areas. At CdS III, a sterilization drilling campaign is underway and one positive intercept suggests the extension of the Anomalia and Jambeiro target trends.
A total of 128,888m was drilled at Serra Grande. Exploration drilling at Pitanga, Palmeiras South, Mangaba, Corpo IV, V and Limoeiro resulted in the addition of Mineral Resource. The mine acquired the Palmeiras South area in late 2018 which contains the southern extension of all mineralised trends; subsequent drilling during 2019 returned positive results along Structure 3.5.
The Pitanga orebody was discovered along Structure III close to Mina Nova mine. The reinterpretation of existing orebodies at Corpo IV, Corpo V and Limoeiro supported exploration drilling and led to new ounce generation. Target generation focused on assessing shallow opportunities and using interpreted S2 stacking behaviour to identify new potential areas to test in 2020.
Colombia:Limited exploration activities were completed at Gramalote. RC drilling started at Trinidad in October 2019 and diamond drilling at Gramalote in November with no results reported to date. The La Colosa project continued on care and maintenance following the cessation of all field activities in April 2017.
At Quebradona, a total of 10,494m was drilled, focusing on geotechnical programmes for site infrastructure, the tunnel trace, the mine subsidence area and the crusher chamber. Geological and structural models were updated for infrastructure sites, the tunnel and mine area.
Tanzania: At Geita, a total of 96,407m of drilling was completed in 2019.
The overall results for Star & Comet Cut 2 Mineral Resource drilling were positive. While exploratory drilling results identified no economic intersections, interpretation and review are ongoing. The Star & Comet Cut 3 Mineral Resource drilling results confirmed the down-dip continuity. Extension drilling at Star & Comet Cut 2 and Cut 3 confirmed the presence of open-ended high-grade mineralisation along the hanging wall and footwall sides of the intrusive, suggesting that the Cut 2 and Cut 3 orebodies might join and become one.
Mineral Resource development drilling programmes for Nyankanga underground were carried out at Blocks 3, 4 and 5 as well as in the gap area between Block 2 and 3. All results were positive.
Three of eight holes in the surface drilling programme at the Star & Comet North Extension returned lower grades than previous data. Results from surface drilling completed at Selous confirmed the orebody extensions inside and outside the pit margins. While exploratory surface drilling at Mabe delineated localised orezones of medium to high grade.
At Geita Hill, underground Blocks 1 and 2 drilling results defined low-grade mineralised zones. Drilling initiated at the Roberts deposit confirmed the presence and potential of economic ore zones within and outside the optimised pit.
Guinea: At Siguiri, a total of 74,939m was drilled during the year.
Kami drilling has shown that the mineralisation extends into the fresh rock and into oxide in Kami East saddle. Bidini drilling has shown that the mineralisation extends to the east of the pit in oxide. Silakoro West drilling was completed and confirmed the mineralisation.
Silakoro North drilling intersected mineralisation associated with disseminated sulphides. Foulata East drilling results show unmineralised albitite, while the main Foulata drillholes indicate the potential extension of mineralisation at depth and along the trend. Advanced grade control (AGC) drilling at Foulata confirmed the model.
At Saraya, drilling confirmed the extension of shallow mineralisation to the north and deeper along the plunge. The Saraya AGC drilling confirmed the model despite defining thicker internal waste intervals. At Seguelen PB2 drilling confirmed the extension of the mineralisation in the fresh rock.
The Sanu Tinti infill drilling crossed potentially mineralised breccioconglomerates layers. At Niono, reconnaissance drilling showed weak potential for oxide mineralisation. The Doko, Block 4, reconnaissance drill programme is now 48% complete with some economic intersection.
At Balato North, Saraya West EL and Setiguiya West reconnaissance drilling showed negative results. Field visits and reviews confirmed the potential of the Carbonate Hills (East and Central) targets.
Ghana: At Iduapriem, a total of 21,279m of drilling was completed in 2019. Exploration focused on Mineral Resource conversion drilling at Block 1, Ajopa, Efuanta and Block 4S. Regional mapping of the hydrothermal targets commenced during the year as well as auger drilling at Mile 8 and Mile 5W targets.
At Obuasi, drilling started on 27 May 2019 with capital drilling on 41 level, grade control drilling on 17 and 22 levels, and expensed exploratory drilling in the GCS top area.
The 41-level drill programme completed 7,921m of combined RC and diamond drilling. Two multi-purpose RC/diamond rigs are being used to accelerate data acquisition and reduce costs. The grade control programme drilled 3,480m and showed continuity of the Obuasi fissure in terms of grade and structure. The 5,475m of exploratory drilling indicated potential in the footwall splays.
Democratic Republic of the Congo: A total of 25,210m was drilled at Kibali during the year.
The drilling results at Gorumbwa-Sessenge gap support the continuity of the mineralisation from Gorumbwa into the gap.
At Ikamva, drilling observations support the model while at Ikamva-East, the drilling programme was completed, and the results returned support the consistency of the two lenses. Two holes were drilled into the Kalimva-Ikamva Hinge zone with results supporting the model of a potential link between the two structures.
Results also suggest the presence of other shoots pertaining to the Kalimva system.
The orientation drilling programme along the Zakitoko-Birindi trend was completed and indicate an extension down dip and along strike. A data review of the Aindi area was conducted leading to identification of four zones of interest.
In the Oere-Kalimva Gap, the drilling programme is complete and indicates no mineralisation within the gap. While in the Mofu-Oere gap, a trenching programme showed weak results from surface that increase down dip and plunge.
Eight trenches were excavated in the Mandungu-Memekazi-Renzi trend with overall results supporting the model and the trenching programme at Memekazi Northeast, returning results that support the potential of the area.
At Sayi, the results support the model and continuity of the interpreted mineralisation. While drilling in the Sayi-Mengu gap returned narrow intercepts. Results from the Renzi trenching programme support the model, though they are relatively low grade, while the Oere drilling results support the presence of highgrade domains within the mineralisation envelope.
A soil sampling programme in the KZ South area returned results supporting potential for a mineralised system. At Pakaka, drilling results from the hole furthest southeast support a consistently thin high-grade mineralisation along the sheared contact observed in the pit.
Mali: No drilling was completed in 2019.
Australia:At Sunrise Dam, six underground rigs were in use during the period, with most drilling taking place at Vogue, Midway Shear (MWS) Steeps and Elle, as well as at Stella (Target 18) and Steeps below Sunrise Shear Zone (Target 01). Commissioning of a seventh underground rig took place during November and an eighth rig was commissioned in December 2019.
One surface rig was in operation, targeting the southern extensions of the deposit from surface, 520m and 360m south of the current Ore Reserve from the Cleo waste dump.
At Tropicana, mine drilling consisted of infill drilling at Havana to upgrade the Mineral Resource confidence and assist in the mining option studies. Significant results were returned from the infill drilling at Havana, as well as encouraging results from drilling at Havana South down-dip.
Regional drilling was concentrated at Iceberg, Tumbleweed, New Zebra, Angel Eyes Voodoo Child, Wild Thing, Electra, Mojito and Monsoon. Regional drilling produced an important result from RC drilling at Voodoo Child that indicates mineralisation is present ca. 500m along strike from the defined prospect.
Colombia: The greenfields projects in Colombia make a significant contribution to AngloGold Ashanti’s Mineral Resource with La Colosa, Quebradona and Gramalote collectively contributing 38.5Moz. Quebradona and Gramalote contribute 4.3Moz to the gold Ore Reserve. Quebradona also has a copper Ore Reserve of 3,068Mlbs. Both Quebradona and Gramalote are at various stages of feasibility study while the La Colosa project is currently under force majeure, pending the necessary environmental permits.
The Gramalote project, a joint venture between AngloGold Ashanti and B2Gold Corp (B2Gold) in Colombia, 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 north-west of the Antioquia Department. It is approximately 230km north-west of Bogota and about 120km north-east of Medellin.
In September 2019, AngloGold Ashanti announced that an agreement had been reached with B2Gold, under which B2Gold would fund an investment and exploration programme in 2020 to the value of $13.9 million, in order to earn back to a 50:50 partnership and assume management of the project effective 1 January 2020. Completion of the feasibility study for Gramalote is targeted for the end of 2020. The project has several key infrastructure advantages including reliable water supply, its close proximity to key infrastructure and a technically capable workforce in country.
As per the agreement, B2Gold assumed management of the Gramalote joint venture on 1 January 2020. On 21 January 2020, B2Gold announced positive results from the updated preliminary economic assessment (PEA) for the Gramalote Ridge deposit, a part of the Gramalote project. The PEA updates and enhances previous studies on the Gramalote project in several areas.
B2Gold is currently completing approximately 42,500m of infill drilling at Gramalote Ridge to convert the existing Inferred Mineral Resource to the Indicated category, and 7,645m geotechnical drilling for site infrastructure.
The Gramalote joint venture will continue to advance community resettlement programmes, establish coexistence programmes for small artisanal miners, to work on health, safety and environmental projects and to continue to work with government and local communities on social programmes.
B2Gold, as manager, plans to continue to complete and submit the feasibility work by 31 December 2020. The main work programme for feasibility is infill drilling to confirm and upgrade the Inferred Mineral Resource to the Indicated category.
The Environmental Impact Study and Project Implementation Plan for the Gramalote project have been fully approved by the National Authority of Environmental Licences of Colombia. Due to necessary modifications to the processing plant and infrastructure locations, a Modified Environment Impact Study and a Modified Project Implementation plan were submitted and are currently in the final stages of approval. If the final economics of the feasibility study are positive and the joint venture makes the decision to develop Gramalote as an open pit gold mine, B2Gold would use its proven internal mine construction team to build the mine and mill facilities, and operate the mine on behalf of the joint venture.
The Quebradona deposit is located approximately 104km south-west from Medellin, Antioquia Department and is a porphyry-related, copper-gold mineralised stock work system, located within the Western Cordillera of Colombia. Until 2019, the project was a joint venture with B2Gold (5.7% and diluting) and AngloGold Ashanti (94.3% and operator). During 2019, the 5% dilution threshold was reached and the parties entered into a royalty agreement in which B2Gold transferred the minority interest in the joint venture to AngloGold Ashanti in exchange for a royalty fee during production.
During the year, AngloGold Ashanti continued with the exploration programme, with the key aim of developing the feasibility study, completing and submitting the environmental and construction licence requests (filled in November 2019), and securing the land required for project implementation. The Quebradona project is an attractive business case of ca. 8.7Moz gold equivalent, with required capital investment estimated at around ca. US$1billion and an internal rate of return at approval stage of 15% (meeting our required hurdle rate). 2020 will be a critical year for the project, with an estimated investment of approximately $64 million, targeted at the following key milestones:
|•||Complete the feasibility study and present it to the board for approval in November 2020;|
|•||Obtain the environmental and construction licence by November 2020; and|
|•||Complete the process of securing the land for project implementation.|
The La Colosa project is located approximately 150km west of Bogota in the Tolima Department. It is a very large porphyrystyle gold deposit discovered by the Colombia greenfields exploration team in 2006. The project is 100% owned by AngloGold Ashanti. The project comprises a singular large deposit likely in excess of 28.45Moz of mineral resources and endowment. The project’s pre-feasibility study began in 2010 and was formally put on care and maintenance in April 2017. A second-time force majeure was granted pending the approval of environmental permits. The force majeure is expected to be renewed in June 2020 if the conditions associated with the environmental licence permits remain.
AngloGold Ashanti’s operations are divided into the following regions:
|•||South Africa – West Wits and surface operations;|
|•||Continental Africa – operations in Ghana, Guinea and Tanzania and joint venture operations in the DRC and Mali;|
|•||Australia – operations in Australia; and|
|•||Americas – operations in Argentina and Brazil, and exploration projects in Colombia.|
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 at 31 December 2019” 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 to “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine”.
Mine, operation and business unit are used interchangeably. Percentages indicate the ownership interest held by AngloGold Ashanti. All operations are 100 percent owned unless otherwise indicated.
AngloGold Ashanti’s operating mines are all accessible by road.
AngloGold Ashanti has seven mining operations within the Continental Africa region. Mining is from both open pit and underground, with Obuasi being an underground mine in a redevelopment phase, Iduapriem, Siguiri, Morila and Sadiola being open pit mines, and Kibali and Geita being a combination of open pit and underground mines.
DEMOCRATIC REPUBLIC OF THE CONGO (DRC)
Kibali Gold Mine, located in the north-eastern part of the DRC near the international borders with Uganda and South Sudan,is the sole operation in the DRC.
DRC - Kibali
The Kibali Gold Mine is a joint venture (JV) between AngloGold Ashanti (45 percent), Barrick Gold Corporation (45 percent) and Société Miniere de Kilo-Moto SA UNISARL (SOKIMO), a state-owned gold company owning the balance. Kibali is operated by Barrick Gold Corporation. The mine is located adjacent to the village of Doko, which is located in the west of the project area. Kibali is approximately 210 kilometres by road from Arua, on the Ugandan border and immediately north of the district capital of Watsa.
The operational area falls within the administrative territory of Watsa in Haut Uélé province. The operation comprises both open pit and underground mining. First gold was poured in September 2013 from the open pit operations. Development of the underground mine commenced in 2013. The first underground development ore was mined in 2013 and stoping commenced in 2015.Initial production was via a twin decline from surface. From 2018 onwards, the majority of ore was hoisted up the shaft. The decline to surface is used to haul some of the shallower zones and to supplement shaft haulage. The underground mine has both a ramp and shaft system, with the shaft reaching a depth of 740 metres. Kibali has a processing plant capable of producing an average of 600koz of gold per annum by treating 7.2Mtpa. The current processing plant can treat both oxide and fresh sulphide material and is configured for flotation and ultra-fine grind of the flotation concentrate, a treatment that is required for the sulphide ore type before leaching. Power to the mine is self generated by a combination of hydroelectric and diesel generators.
The Mineral Resource and Ore Reserve are covered by exploitation permits (11447, 11467, 11468, 11469, 11470, 11471, 11472, 5052, 5073 and 5088) totalling 1,836km2. The Kibali Gold Mine was granted the 10 exploitation permits under the applicable DRC mining code, seven of which are valid until 2029 and three of which are valid until 2030.
The Kibali Gold Mine is located within the Moto Greenstone Belt, which consists of Archean Kibalian volcano-sedimentary rocks and ironstone-chert horizons that have been metamorphosed to greenschist facies.
The combined Karagba, Chauffeur and Durba (KCD) deposit is host to the majority of the currently defined Mineral Resource and Ore Reserve, as well as the current open pit and underground mining operations. KCD is hosted within a mineralised corridor that also hosts the Sessenge, Gorumbwa and Pakaka deposits and a number of exploration prospects.
The known deposits of the Kibali project are hosted along a reactivated thrust plane that creates plunging lodes of mineralisation as exemplified by the KCD deposit. The majority of gold mineralisation identified to date is disseminated style, hosted within a sequence of coarse volcaniclastic and sedimentary rocks. The mineralisation is generally stratigraphically bound and associated with carbonate-silica-albite alteration with minor sulphide.
AngloGold Ashanti has two mines in Ghana: Obuasi, currently in a redevelopment phase, is an underground mine and Iduapriem is an open pit mine.
Ghana – Iduapriem
Iduapriem, wholly owned by AngloGold Ashanti since September 2007, is situated in the western region of Ghana, some 70km north of the coastal city of Takoradi and approximately 10km southwest of the town of Tarkwa.
Iduapriem is a multiple open pit operation that currently sources ore from the Ajopa and Block 7 and 8 pits. The Iduapriem treatment plant has two semi-autogenous grinding mills and two ball mills which run in two parallel circuits, each with a semi-autogenous grinding mill and a ball mill. The carbon-in-pulp plant has a capacity of 5.1Mtpa. Power is supplied to the mine by the Volta River Authority (VRA) and GridCo.
Iduapriem comprises the Iduapriem, Ajopa North and South and Teberebie mining leases on a 139.77km2 concession. Applications have been submitted to the minerals authority for the renewal of the mining permits which, according to Ghanaian law, allows for the continuation of mining on the expired leases while the renewal process is in progress. The environmental certificate for the project expired in October 2017. However, the 2017- 2020 Environmental Management Plan (EMP), which is required for to renew the certificate, was submitted on 6 April 2017. Comments were received by the mine from the Environmental Protection Agency (EPA) in June 2017 together with invoices for payment of the permit fees for the certificate. AAIL submitted the revised EMP (with the EPA’s comments addressed) to the EPA on 10 August 2018 and made the required payments. The certificate is still pending at the time of writing this annual report. The Ghanaian Chamber of Mines is currently engaging with the environmental authorities (EPA) on behalf of the company and other sister mines whose certificates and other permits are outstanding. There is a reasonable basis to conclude that all permits required for the project will be obtained.
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 Proterozoic Tarkwaian System. 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 located in the Ashanti Region of Ghana, some 260 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 started production in 1897, was placed on limited operations towards the end of 2014, and on care and maintenance from 2016. Some aspects of the mine continued under limited operational conditions, including the development of the underground decline. A favourable feasibility study was completed in 2017 and indicated a strong technical and economical case with an anticipated 20-year mine life. In 2018, approval was received from the AngloGold Ashanti board to proceed with the project. The redevelopment project, to establish Obuasi as a modern, efficient, mechanised, underground operation, commenced in late 2018 and the first gold was poured late in 2019.
Phase 1 of the project, which set up the plant to achieve a daily processing rate of 2,000t of ore, was completed. Phase 2, which aims to expand plant capacity to 4,000t a day will continue through 2020. Existing infrastructure includes a 2.4Mtpa processing plant with flotation and bacterial oxidation (BIOX), underground development, hoisting shafts and associated infrastructure, power and water reticulation, office complexes, workshops and company housing estates. Power is supplied to the mine by the Volta River Authority (VRA) and GridCo.
The Mineral Resource and Ore Reserve are covered by the Obuasi Concession comprising 152.6km2 and the Binsere Concession parts 1, 2 and 3 comprising 48.86km2. The mining concessions, which expire on 5 March 2054, are covered by a Development Agreement and Tax Concession Agreement with the government of Ghana.
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.
Two main ore types are mined:
|•||quartz veins which consist mainly of quartz with free gold in association with lesser amounts of various metal sulphides of iron, zinc, lead and copper. The gold particles are generally coarse-grained and occasionally visible to the naked eye. This ore type is generally non-refractory; and|
|•||sulphide ore which is characterised by the inclusion of gold in the crystal structure of a sulphide material. The gold in these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer grained arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally refractory.|
REPUBLIC OF GUINEA (GUINEA)
Siguiri Gold Mine is AngloGold Ashanti’s sole operation in Guinea.
Guinea - Siguiri
Siguiri Gold Mine is 85 percent owned and operated by AngloGold Ashanti and 15 percent by the government of Guinea. Siguiri is located approximately 850 kilometres north-northeast of Conakry, 25 kilometres northwest of the town of Siguiri and 220 kilometres southeast of the Malian capital Bamako, near the Malian border.
Siguiri is currently a m