AU AngloGold Ashanti
Filed: 26 Mar 21, 2:44pm
As filed with the Securities and Exchange Commission on 26 March 2021
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 2020
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, Interim Chief Executive Officer, Telephone: +27 116376019
E-mail: firstname.lastname@example.org, 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*|
|5.125% Notes due 2022||AU/22||New York Stock Exchange|
|3.75% Notes due 2030||AU/30||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||416,890,087|
|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.|
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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
|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|
|5F.||Tabular disclosure of contractual obligations|
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, we, us, our 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 rand, ZAR and R are to the lawful currency of the Republic of South Africa, references to US dollars, dollar, USD, US$ and $ 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 dollar and A$ are to the lawful currency of Australia, references to BRL and Brazilian real are to the lawful currency of Brazil, references to TZS and Tanzanian shilling are to the lawful currency of the United Republic of Tanzania, references to Ghanaian cedi, GHS, cedi or Gh¢ are to the lawful currency of Ghana and references to GBP, British pounds and £ 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”, and "average gold price received 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 (which was updated in November 2018) 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 as well as "average gold price received 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 2020 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 (Harmony). 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 transaction closed on 30 September 2020.
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, return on equity, 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 and forecasts are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic, social and political and market conditions, the success of business and operating initiatives, changes in the regulatory environment and other government actions, including environmental approvals, fluctuations in gold prices and exchange rates, the outcome of pending or future litigation proceedings, any supply chain disruptions, any public health crises, pandemics or epidemics (including the COVID-19 pandemic), and other business and operational risks and other factors as described in “Item 3D: Risk Factors” and elsewhere in this annual report. These factors are not necessarily all of the important factors that could cause AngloGold Ashanti’s actual results to differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. Consequently, readers are cautioned not to place undue reliance on forward-looking statements.
AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events, except to the extent required by applicable law. All subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are qualified by the cautionary statements herein.
GLOSSARY OF SELECTED TERMS
All-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 (which was updated in November 2018) 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: The attributable gold income (price received), divided by attributable ounces of gold sold.
Average number of employees: The monthly average number of production and non-production employees and contractors employed during the year, where contractors are defined as individuals who have entered into a fixed-term contract of employment with a group company or subsidiary. Employee numbers of joint ventures represent the group’s attributable share.
Capital expenditure: Total capital expenditure on tangible assets.
Effective tax rate: Current and deferred taxation charge for the year as a percentage of profit before taxation.
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-foreign operation: An entity with a functional currency the same as the parent company (ZAR), which differs from the group presentation currency (USD).
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 $750 million 5.125 percent bonds due 2022, the $700 million 3.75 percent bonds due 2030 and the $300 million 6.50 percent bonds due 2040.
Region: Defines the operational management divisions within AngloGold Ashanti Limited, namely South Africa, Africa region (DRC, Ghana, Guinea and Tanzania), Australia and the Americas (Argentina and Brazil).
Related party: Parties are considered related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or if such parties are under common control.
Significant influence: The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decision of an entity so as to obtain economic benefit from its activities.
Strate: The licensed Central Securities Depository (CSD) for the electronic settlement of financial instruments in South Africa.
Sustaining capital: Capital expenditure incurred to sustain and maintain existing assets at their current productive capacity in order to achieve constant planned levels of productive output.
Total cash costs (net of by-product revenue): Total cash costs net of by-product revenue include site costs for all mining, processing and administration and are inclusive of royalties and production taxes. Depreciation, depletion and amortisation, rehabilitation, corporate administration, employee severance costs, capital and exploration costs are excluded. Total cash costs net of by-product revenue per ounce are the attributable total cash costs divided by the attributable ounces of gold produced.
Weighted average number of ordinary shares: The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, weighted on a time basis for the period during which they have participated in the income of the group, and increased by share options that are virtually certain to be exercised.
|$, US$, USD, US dollar or dollar||United States dollar|
|ARS or Argentinean peso||Argentinean peso|
|A$, AUD or Australian dollar||Australian dollar|
|BRL or Brazilian real||Brazilian real|
|€ or Euro||European euro|
|GHS, Gh¢, Ghanaian cedi or cedi||Ghanaian cedi|
|TZS or Tanzanian shilling||Tanzanian shilling|
|ZAR, R, South African rand or rand||South African rand|
|£, GBP or British pound||British pound|
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 potentially economic or saleable products that emanate from the core process of producing gold or copper, including silver, molybdenum and sulphuric acid.
Carbon-in-leach (CIL): Gold is leached from a slurry of ore where cyanide and carbon granules are added to the same agitated tanks. The gold loaded 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 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.
Comminution: Comminution is the crushing and grinding of ore to make gold available for physical or chemical separation (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.
Electrowinning: 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 electrowinning.
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 (SAMREC 2016).
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 or copper in the case of Quebradona (and, in some cases, often valuable by-products).
Milling: A process of reducing broken ore to a size at which concentrating or leaching 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 Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, 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 subdivided, and must be so reported, in order of increasing confidence in respect of geoscientific evidence, into Inferred, Indicated or Measured categories (SAMREC 2016).
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. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at prefeasibility or feasibility level as appropriate that include application of modifying factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified.
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.
Quartz: A hard mineral consisting of silica dioxide found widely in all rocks.
Recovered grade: The recovered mineral content per unit of ore treated.
Reef: A gold-bearing horizon, sometimes a conglomerate band, that may contain economic levels of gold. Reef can also be any significant or thick gold bearing quartz vein.
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.
Scats: Within the metallurgical plants, scats is a term used to describe ejected ore or other uncrushable / grinding media arising from the milling process. This, typically oversize material (ore), is ejected from the mill and stockpiled or re-crushed via a scats retreatment circuit. Retreatment of scats is aimed at fracturing the material such that it can be returned to the mills and processed as with the other ores to recover the gold locked up within this oversize material.
Seismic event: A sudden inelastic deformation within a given volume of rock that radiates detectable seismic energy.
Shaft: A vertical or subvertical excavation used for accessing an underground mine; for transporting personnel, equipment and supplies; for hoisting ore and waste; for ventilation and utilities; and/or as an auxiliary exit.
Short ton: Used in imperial statistics. Equal to 2,000 pounds.
Smelting: A pyro-metallurgical operation in which gold precipitate from electro-winning or zinc precipitation is further separated from impurities.
Stoping: The process of excavating ore underground.
Stripping ratio: The ratio of waste tonnes to ore tonnes mined calculated as total tonnes mined less ore tonnes mined divided by ore tonnes mined.
Tailings: Finely ground rock of low residual value from which valuable minerals have been extracted.
Tonnage: Quantity of material measured in tonnes or tons.
Tonne: Used in metric statistics. Equal to 1,000 kilograms.
Waste: Material that contains insufficient mineralisation for consideration for future treatment and, as such, is discarded.
Yield: The amount of valuable mineral or metal recovered from each unit mass of ore expressed as ounces per short ton or grams per metric tonne.
Zinc precipitation: Zinc precipitation is the chemical reaction using zinc dust that converts gold in solution to a solid form for smelting into unrefined gold bars.
|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|
|EHS||Environmental, health and safety|
|ERP||Enterprise resource planning|
|ESG||Environmental, social and governance|
|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|
|GHG||Greenhouse gas emissions|
|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 IV||The King Report on Corporate Governance for South Africa, 2016|
|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 (including in-line XBRL, i-XBRL)|
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 2020, 2019 and 2018 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 2017 and 2016 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||4,427||3,525||3,336||3,394||4,223|
|Cost of sales||(2,699)||(2,626)||(2,584)||(2,607)||(3,401)|
|Gain (loss) on non-hedge derivatives and other commodity contracts||(19)||5||(2)||—||19|
|Corporate administration, marketing and other expenses||(68)||(82)||(76)||(64)||(61)|
|Exploration and evaluation costs||(124)||(112)||(98)||(105)||(133)|
|Impairment, derecognition of assets and p/l on disposal||(1)||(6)||(7)||(2)||—|
|Other expenses (income)||(57)||(83)||(79)||(150)||—|
|Other operating expenses||—||—||—||—||(110)|
|Operating profit (loss)||1,459||621||490||466||495|
|Foreign exchange and other gains (losses)||—||(12)||(9)||(11)||(88)|
|Finance costs and unwinding of obligations||(177)||(172)||(168)||(157)||(180)|
|Fair value adjustments||—||—||—||—||9|
|Share of associates and joint ventures’ profit (loss)||278||168||122||22||11|
|Profit (loss) before taxation||1,589||619||445||328||269|
|Profit (loss) after taxation from continuing operations||964||369||233||165||80|
|Profit (loss) from discontinued operations||7||(376)||(83)||(336)|
|Profit (loss) for the year||971||(7)||150||(171)||80|
|Allocated as follows|
|- Continuing operations||946||364||216||145||63|
|- Discontinued operations||7||(376)||(83)||(336)||—|
|- Continuing operations||18||5||17||20||17|
|Basic earnings (loss) per ordinary share (U.S. cents)||227||(3)||32||(46)||15|
|Earnings (loss) per ordinary share from continuing operations||225||87||52||35||15|
|Earnings (loss) per ordinary share from discontinued operations||2||(90)||(20)||(81)||—|
|Diluted earnings (loss) per ordinary share (U.S. cents)||227||(3)||32||(46)||15|
|Earnings (loss) per ordinary share from continuing operations||225||87||52||35||15|
|Earnings (loss) per ordinary share from discontinued operations||2||(90)||(20)||(81)||—|
|Dividend per ordinary share (U.S. cents)||9||7||6||10||—|
(1) The selected financial information presented for the year ended 31 December 2016 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.
|As at 31 December|
|(in millions, except share and per share amounts)|
|Consolidated balance sheet data|
|Right of use assets||142||158||—||—||—|
|Investments in associates and joint ventures||1,651||1,581||1,528||1,507||1,448|
|Trade, other receivables and other assets||235||122||102||67||34|
|Cash restricted for use||31||31||35||37||36|
|Trade, other receivables and other assets||229||250||209||222||255|
|Cash restricted for use||42||33||31||28||19|
|Cash and cash equivalents||1,330||456||329||205||215|
|Assets held for sale||—||601||—||348||—|
|EQUITY AND LIABILITIES|
|Share capital and premium||7,214||7,199||7,171||7,134||7,108|
|Accumulated losses and other reserves||(3,519)||(4,559)||(4,519)||(4,471)||(4,393)|
|Environmental rehabilitation and other provisions||731||697||827||942||877|
|Provision for pension and post-retirement benefits||83||100||100||122||118|
|Trade, other payables and provisions||8||15||3||3||4|
|Trade, other payables and provisions||627||586||594||638||615|
|Liabilities held for sale||—||272||—||126||—|
|Total equity and liabilities||7,672||6,863||6,643||7,219||7,153|
|Number of ordinary shares as adjusted to reflect changes in share capital||416,890,087||415,301,215||412,769,980||410,054,615||408,223,760|
|Share capital (exclusive of long-term debt and redeemable preference shares)||17||17||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)(2)
|South African cents per ordinary share||165||95||70||130||—|
US cents per ordinary share(3)
(1)From 2017 to 2019, the dividend policy allowed 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.
(2)Since 2020, the dividend policy allows the company's Board of Directors, at its discretion, to declare an annual dividend to be based on 20 percent of the free cash flow generated by the business, before growth capital expenditure, for that financial year.
(3)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, operational and financial results and the price of its securities.
SUMMARY OF RISK FACTORS
1.Risks Related to Our Industry
•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.
•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.
•Mining companies are subject to extensive environmental, health and safety laws and regulations. Failure to comply could result in enforcement proceedings, claims, suspension of operations, community protest and/or additional capital or operating expenditures that could adversely impact AngloGold Ashanti’s financial condition or reputation.
•Compliance with tailings management requirements and standards, and potential liabilities in the event of a failure to timely comply or an incident involving a tailings storage facility, could adversely impact AngloGold Ashanti’s financial condition, results of operations and reputation.
•Mining companies face uncertainty and risks in exploration, feasibility studies and other project evaluation activities.
•Mining is inherently hazardous and the related risks of events that cause disruptions to our mining operations may adversely impact cash flows and overall profitability.
•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.
•Mining companies’ operations are vulnerable to infrastructure constraints.
•Mining companies face strong competition and industry consolidation.
2. Risks Related to Our Operations and Business
•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.
•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
•AngloGold Ashanti’s inability to retain its senior management may have an adverse effect on its business.
•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.
•Increased labour costs could have a material adverse effect on AngloGold Ashanti’s 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’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.
•Labour unrest, activism and disruptions (including protracted stoppages) could have a material adverse effect on AngloGold Ashanti’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.
•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.
•Title to AngloGold Ashanti’s properties may be uncertain and subject to challenge.
3. Risks Related to Our Corporate and Financing Structure and Strategy
•AngloGold Ashanti expects to have significant financing requirements.
•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.
•AngloGold Ashanti may not pay dividends or make similar payments to shareholders in the future.
•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 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.
•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.
•The level of AngloGold Ashanti’s indebtedness could adversely impact its business.
•Any acquisition or acquisitions that AngloGold Ashanti may complete may expose the company to new geographic, political, legal, social, operating, financial and geological risks.
•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.
•Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to AngloGold Ashanti’s credit facilities.
4. Market Risks
•Commodity market price fluctuations could adversely affect the profitability of operations.
•Foreign exchange fluctuations could have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition.
•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.
•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.
•Global economic conditions could adversely affect the profitability of operations.
•Energy cost increases and power fluctuations and stoppages could adversely impact the company’s results of operations and financial condition.
•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.
•Inflation may have a material adverse effect on results of operations.
5. Other Regulatory and Legal Risks
•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 is subject to the risk of litigation, the causes and costs of which are not always known.
•Compliance with “conflict minerals” and “responsible gold” legislation and standards could result in significant costs.
•Compliance with emerging climate change regulations could result in significant costs and climate change may present physical risks to a mining company’s operations.
•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.
•Breaches in cybersecurity and violations of data protection laws may adversely impact AngloGold Ashanti’s business.
•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.
Risks Related to Our Industry
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.
Mining companies are under increasing pressure to demonstrate that, whilst they seek a satisfactory return on investment for shareholders, 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 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, and force majeure was declared at the project. 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 also contested a 2013 popular consultation which attempted to ban all mining activities in the area. Subsequently, the Colombian Constitutional Court has decided that local municipalities or regions do not have authority to veto mining activities through popular consultations. See “Item 8A: Legal Proceedings—Colombia”. If AngloGold Ashanti is unsuccessful in securing community support for its projects, or groups opposed to mining successfully pursue similar or other legal mechanisms to attempt to block exploration or extraction activities, 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 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. For example, constraints on the availability of mining and processing equipment, skilled labour, utilities, transportation and/or appropriate smelting and refining arrangements could result in delays or increase the costs needed to secure adequate supplies or resources or to construct facilities required for our mining operations. 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.
The remote location of many mining properties, delays in obtaining necessary environmental and other governmental permits and approvals, the impact of public health crises, epidemics or pandemics (including the COVID-19 pandemic) 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.
AngloGold Ashanti may prove unable to successfully develop 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. Failure to comply could result in enforcement proceedings, claims, suspension of operations, community protest and/or additional capital or operating expenditures that could adversely impact AngloGold Ashanti’s financial condition or reputation” 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 are subject to extensive environmental, health and safety laws and regulations. Failure to comply could result in enforcement proceedings, claims, suspension of operations, community protest and/or additional capital or operating expenditures that could adversely impact AngloGold Ashanti’s financial condition or reputation.
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, including with respect to tailings management and TSFs. See “—Compliance with tailings management requirements and standards, and potential liabilities in the event of a failure to timely comply or an incident involving a tailings storage facility, could adversely impact AngloGold Ashanti’s financial condition, results of operations and reputation.” 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 may enforce a total or partial shutdown of operations to enable investigations into the cause of accidents at those operations. 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 and material breach of such applicable environmental laws, amongst 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 concession contract 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, a consolidated class action with respect to the La Colosa project 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. Leaks or discharges of hazardous materials could result in liabilities for clean-up or personal injury that may not be covered by insurance. The company has identified groundwater contamination plumes at certain of its operations that have occurred primarily as the result of seepage from surface operations and facilities, including tailings storage facilities and waste rock piles, or from sulphide or other substances in local rock formations which are exposed to water. 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.
In addition, 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.
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 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 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. 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 and discontinued operations) totalled $637 million in 2018, $634 million in 2019 and $674 million in 2020. 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 the company’s 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.
Environmental laws, regulations and standards 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.
Compliance with tailings management requirements and standards, and potential liabilities in the event of a failure to timely comply or an incident involving a tailings storage facility, could adversely impact AngloGold Ashanti’s financial condition, results of operations and reputation.
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 TSF, including any associated dam, can be significant. An incident at AngloGold Ashanti’s operations could result, amongst 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 “—Mining companies are subject to extensive environmental, health and safety laws and regulations. Failure to comply could result in enforcement proceedings, claims, suspension of operations, community protest and/or additional capital or operating expenditures that could adversely impact AngloGold Ashanti’s financial condition or reputation.” And also “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, both at the federal and state levels, have generally increased scrutiny of mining operations in Brazil, and of TSFs in particular, and 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 likely 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. For example, at the federal level, the Brazilian National Mining Agency (ANM) issued Resolution No. 13/19 in August 2019 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 operators to cease all storage and disposal activities at TSFs (known as “deactivation” or “desativação”) constructed or heightened upstream or by an “unknown” method by 15 September 2021 as well as to decommission 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. To comply with the terms of ANM Resolution No. 13/19, the mine will also need to decommission the Serra Grande tailings dam by 15 September 2025. Furthermore, Federal Law No. 14.066/20, adopted in September 2020, also imposes requirements on companies to decommission upstream TSFs, including our Serra Grande tailings dam, by 25 February 2022 (which date is earlier than required by ANM Resolution No. 13/19). However, Federal Law
No. 14.066/20 does permit extensions of the compliance deadline, with the consent of the ANM based on the technical plan for decommissioning. With respect to downstream (or “centerline”) TSFs, Federal Law No. 14.066/20 requires companies, to the extent that communities are located in the self-rescue zone of those TSFs, to implement one of the following measures for such structures: either (i) the structure must be deactivated 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, deactivation and decommissioning of those TSFs will be required at the end of the life of the mine. All of the TSFs operated by AngloGold Ashanti in Brazil have communities located in self-rescue zones. AngloGold Ashanti is planning to transition to dry-stacking operations for tailings storage at each location in Brazil in the near term and currently estimates that the capital expenditures in 2021 required to implement this new technology will be in excess of $70 million. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine—Americas—Brazil”. In addition, AngloGold Ashanti has committed to implement a new Global Industry Standard on Tailings Management, established in August 2020 by a panel comprised of industry and NGO experts, at its 22 TSFs in Africa, Australia and South America within the next five years, the costs of which are not expected to be material to AngloGold Ashanti.
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 decommission the Serra Grande tailings dam ahead of schedule and could result in the suspension of the company’s operational permit for the Cuiabá tailings dam. As a result, such adverse judgements 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, which may adversely affect the company’s financial condition and results of operations. See “Item 8A: Legal Proceedings—Brazil”. 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.
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, including to estimate tonnages, grades and metallurgical characteristics of the ore, 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:
•prevailing and anticipated prices of metals and other commodities;
•prevailing and anticipated foreign currency exchange rates;
•the required return on investment as based on the cost and availability of capital;
•applicable regulatory requirements, including those relating to environmental or health and safety matters;
•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 in Ore Reserves estimates as well as changes in life of mine estimates could also impact depreciation and amortisation rates, asset carrying values 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 relevant 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 the related risks of events that cause disruptions to our mining operations may adversely impact cash flows and overall profitability.
Gold mining operations are subject to risks of events that may adversely impact our 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;
•mechanical failure or breakdowns and ageing infrastructure;
•failure of unproven or evolving technologies;
•unusual or unexpected geological formations, ground conditions, including lack of mineable face length and ore-pass blockages;
•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;
•seismic activity; and
•other natural phenomena, such as floods, droughts or weather conditions, potentially exacerbated by climate change.
Seismic activity is of particular concern in underground mining operations, particularly at greater depth of mining and/or if residual tectonic stresses are present. 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 and inadequately supported ground conditions 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.
Any of these events or incidents could, individually or in the aggregate, have a material adverse effect on AngloGold Ashanti’s results of operations and financial condition. For example, in South Africa, there were four fatalities as a result of two separate safety incidents in March 2020 at the Mponeng mine. Another fatality was recorded in Ghana in June 2020, when an underground loader operator was fatally injured in a heavy mobile equipment-related incident at the Obuasi mine, which also resulted in a stoppage of that section of the underground operations for several days during the course of an on-site investigation. In addition, in July 2020, a security guard was fatally injured at the Obuasi mine when he was struck by a private vehicle that veered off the road. In Brazil, in February 2021, an underground blaster was fatally injured in a fall-of-ground incident at the Serra Grande mine. Any seismic, flood or other similar events or incidents that occur in the future could have a material adverse effect on the company’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, 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, in February 2013, a fire destroyed the heavy mining equipment stock of spares and components at the Geita gold mine in Tanzania. 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 Ebola virus outbreaks since 2014 in Western Africa, with the latest outbreak detected in early 2021, 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 outbreak of the SARS-CoV-2 virus responsible for COVID-19 or an outbreak of the Ebola virus, or a fear of any of the foregoing, could adversely impact AngloGold Ashanti’s 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, in response to the COVID-19 outbreak, during the months of March and December 2020, both the Argentinian and South African governments imposed significant restrictions on the movement of goods, services and persons (including travel), including a nationwide lockdown of businesses and its citizens (quarantine). In Argentina, the national government also imposed a temporary suspension of mining activities in March and December 2020, adversely impacting the company’s operations. In Brazil, the State of Goiás 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. They could also result in the need to increase inventories on long lead time items and critical consumables and spares which may lead to an increase in working capital. In addition, restrictions in travel, including air travel, and border access may impact the company’s ability to source and transport goods and services required to operate mines, transport gold doré to refineries and ship refined gold from refineries as well as increase the cost. 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 or pandemic outbreak or that there would be no related consequences, such as severe food shortages and social impact. Export restrictions related to any epidemic or pandemic (including as a result of government regulation and prevention measures) could similarly adversely impact the company’s financial condition and results of operations.
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 the acquisition of mining and exploration assets, for mining claims and leases on exploration properties, as well as for specialised equipment, components and supplies necessary for exploration, development and mining of the relevant mining or exploration asset. 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 and results of operations.
Further, industry consolidation may lead to increased competition due to lesser availability of mining and exploration assets. A number of transactions have been completed in the gold mining industry in recent years. 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. in April 2019. 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 as well as significantly larger and more diversified asset bases 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, which could adversely impact any sale process that AngloGold Ashanti may undertake at the same time, including such 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.
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 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 and largely immovable, 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. For example, the royalty rate applicable to gold increased from 2.5 percent to 3.5 percent in 2018 in the DRC and from four percent to six percent in Tanzania in 2017. 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, amongst 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—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, amongst 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 agreement for the Iduapriem mine. See “Item 4B: Business Overview—The
Regulatory Environment Enabling AngloGold Ashanti to Mine—Africa—Ghana”. Any future amendments to the Ghanaian mining regime, negotiation of new agreements, or attempts or failures to renegotiate existing 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 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. For example, recent political instability and related events in Mali led to the president formally resigning in August 2020 after being detained by a group of soldiers. The political instability in Mali may negatively affect the company’s ability to consummate the disposal of its interests in the Yatela joint venture, including the terms, fulfilment of conditions precedent or timing thereof. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine—Africa—Mali”. 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 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, 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 Tanzania, the Tanzania Revenue Authority (TRA) has been raising audit findings during the past decade on various tax matters in relation to fiscal years 2009 to 2018. A total amount of $254 million is in dispute as of 31 December 2020 (2019: $164 million), including additional tax assessments of $94 million received in 2020. AngloGold Ashanti has challenged those audit findings through the applicable administrative and judicial processes. These matters are at different stages of appeal, including before the two administrative bodies, the Tax Revenue Appeals Board and the Tax Revenue Appeals Tribunal, and the Court of Appeal of Tanzania. In March 2020, the Tax Revenue Appeals Board found in favour of the TRA in a tax dispute relating to AngloGold Ashanti’s tax assessment for fiscal year 2012. AngloGold Ashanti appealed this decision to the Tax Revenue Appeals Board. AngloGold Ashanti’s inability to resolve these and other tax disputes favourably or to enforce its rights, may have a material adverse impact on the company’s financial performance, cash flow and results of operations.
For example in Guinea, 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, in Tanzania, AngloGold Ashanti calculates that overdue recoverable input tax, fuel duties and appeal deposits of $229 million (including $139 million of value added tax (VAT) input credit refunds) are owed to AngloGold Ashanti as of 31 December 2020 and held by the Tanzanian government and it is not certain if and when AngloGold Ashanti will be refunded these amounts. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine—Africa—Tanzania”. For example, in the DRC, the company calculates that AngloGold Ashanti’s attributable share of the recoverable VAT balance owed to AngloGold Ashanti by the DRC government amounts to $66 million as of 31 December 2020. Whilst an agreement was reached with the DRC government on the reimbursement of the refundable VAT in the last quarter of 2018, uncertainty remains regarding the timing and level of cash receipts and offsets against other taxes for purposes of the recovery of AngloGold Ashanti’s VAT receivables in the DRC. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine—Africa—Democratic Republic of the Congo (DRC)”. Similarly, as a general matter, it is not certain when or whether AngloGold Ashanti will be refunded all tax-related 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 as well as adversely affect their results of operations and financial condition. 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. Further, in 2018, for example, the DRC government imposed new exchange control rules, as part of its reform of the DRC’s mining code, which resulted in AngloGold Ashanti’s inability to repatriate dividends from the company’s DRC operations. The company’s attributable share of the outstanding cash balances awaiting repatriation from the DRC amounted to $424 million as of 31 December 2020. AngloGold Ashanti’s joint venture partner, Barrick Gold Corporation, which operates the Kibali gold mine, continues to engage with the DRC government regarding the new mining code and the cash repatriation. In this respect, the AngloGold Ashanti’s temporary or permanent inability to repatriate cash from the countries in which AngloGold Ashanti operates could have a material adverse effect on the company’s results of operations and financial condition. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine—Africa—Democratic Republic of the Congo (DRC)”.
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, which are currently set at eight percent for certain goods, including doré bars and gold alloys. AngloGold Ashanti’s export duty receivables in Argentina amounted to $23 million as of 31 December 2020. These re-imposed export duties, if not compensated with other tax reductions, affect the tax stability guarantee granted to Cerro Vanguardia S.A. (CVSA) and could have a material adverse impact on the company’s results of operations and financial condition. Furthermore, in September 2019, the Argentinian government re-established foreign exchange and export controls. Outstanding cash balances awaiting repatriation from Argentina amounted to $65 million as of 31 December 2020. In addition, increased socio-political 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 AngloGold Ashanti’s investment in CVSA. Political uncertainty following the 2019 presidential election further exacerbates the risk. The economic contraction for 2020 ended at 10.5 percent and a further recession is expected in 2021. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine—Americas—Argentina”.
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. See “—AngloGold Ashanti’s 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”.
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, and which require active dust management strategies in underground operations. In South Africa, a significant number of silicosis cases by 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 protective 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) was 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 2020, AngloGold Ashanti has recorded a provision of $61 million (2019: $65 million and 2018: $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, amongst 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. The recent sale of the company’s South African operating assets and liabilities to Harmony did not include the silicosis obligation relating to South African employees, which was retained by AngloGold Ashanti. For further information, see “Item 18: Financial Statements—Note 1—Accounting Policies—Provision for silicosis”.
AngloGold Ashanti also faces certain risks in dealing with HIV/AIDS 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. 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 outbreak of the SARS-CoV-2 virus responsible for COVID-19 may significantly impair the health or mobility of the company’s labour force and, as a result, the company’s ability to maintain its production levels or operations. Excessive absenteeism in, or travel restrictions impacting the, company’s workforce as the result of 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 or slowdown in related mining operations. The extent to which the COVID-19 pandemic will impact AngloGold Ashanti’s results will depend on the scale and duration of future developments in each of the regions where the company operates, which are highly uncertain and cannot be predicted, including notably the possibility of a recurrence or “multiple waves” of the outbreak and new variants. A curtailment or suspension at the company’s mining operations in certain or all regions due to shutdowns, either those requested or mandated by governmental authorities or otherwise elected by the company, including for safety or staffing reasons, may have a material adverse impact on the AngloGold Ashanti’s results of operations and financial condition. See “—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".
In South Africa, AngloGold Ashanti retained the legal and financial obligations in respect of a historical post-retirement medical scheme for certain employees and their dependents following the recent sale of the company’s South African operating assets and liabilities to Harmony. The company’s responsibility extends to South African employees who historically qualified for such scheme (which was discontinued about two decades ago) and who were either not transferred to Harmony in connection with the asset sale but remained employed by the company as of the consummation of the sale or who had retired prior to the completion of the transaction. As of 31 December 2020, AngloGold Ashanti has recorded a provision of $77 million (2019: $93 million and 2018: $93 million) to cover the estimated contribution costs of the post-retirement medical scheme for such current and retired employees. In the event that the required contribution costs ultimately exceed the estimates on which the recorded provision is based, the additional costs incurred by the company may have a material adverse effect on AngloGold Ashanti’s financial position. For further information, see “Item 18: Financial Statements—Note 28—Provision for pension and post-retirement benefits”.
AngloGold Ashanti’s inability to retain its senior management may have an adverse effect on its business.
AngloGold Ashanti’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. In 2020, the company announced several changes to its senior management, including the departure of its former chief executive officer Mr. Kelvin Dushnisky, effective 1 September 2020. The departure of one or more members of AngloGold Ashanti’s senior management may have an adverse effect on its business, results of operations and financial condition. In addition, the loss of one or more members of the senior management team, coupled with any reduced attractiveness of the gold mining sector, could lead to the departures of other members of the management team. The inability of AngloGold Ashanti to retain its senior management could disrupt the company’s operations, and have a material adverse impact on its business, results of operations and 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.
For example, despite the scale of mining activities in many African countries, recruitment of skilled personnel has been challenging as the local development of critical skills struggles to match an increasing demand. Recruitment remains difficult due to university offerings and other training institution offerings 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. Furthermore, local workers with critical skills, such as jumbo operators and tele-remote bogger operators from Ghana and Tanzania are increasingly being targeted for expatriate opportunities across the continent. 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 due to increased pressure for localisation of labour, if continuing, may have an adverse impact on the company’s operations in Tanzania, Ghana and Guinea. Other jurisdictions, such as Ghana, have also adopted local content and local participation policies.
Other regions experience similar challenges. For example, while there is a high concentration of specialised and skilled mining workers in Australia and Brazil, there is significant competition for such personnel in those markets. 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.
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 the Americas, constitute approximately 30 to 40 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, Ghanaian law 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.
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 outbreak of the SARS-CoV-2 virus responsible for COVID-19, may prevent mining contractors from reaching AngloGold Ashanti’s 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.
Risks Related to Our Operations and Business
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, Guinea, Ghana, Tanzania, 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 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 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. 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 NGOs, 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. A new Ebola outbreak was detected in early 2021 in Guinea, which is being monitored continuously. The DRC also experienced an outbreak of the Ebola virus in 2018.
Similarly, the company operates mines in regions that have had confirmed cases of COVID-19 and resulting deaths. In some countries, national or state governments 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 also imposed certain restrictions on travel or business activities as protective measures, including nationwide lockdowns (quarantine), which have disrupted, and may in the future if reimposed 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, in March 2020, following the Argentinian government’s decision to impose a nationwide lockdown (quarantine), including travel restrictions, border closings and shutdown of most industries, Cerro Vanguardia S.A. (CVSA) was required to temporarily suspend mining activities. CVSA restarted milling operations in April 2020. However, in August 2020, a rotation of workers was affected by travel restrictions between the provinces in Argentina and, in November 2020, operations were voluntarily suspended to mitigate the risk of the spread of the COVID-19 virus. Although operations were expected to resume in December 2020, the Argentinian government imposed another partial shutdown of operations which had a negative impact on production at CVSA. Operations resumed in January 2021; however, AngloGold Ashanti’s operations at CVSA continue to be affected by restrictions on the movement of employees between certain localities within the province of Santa Cruz, due to recent incidents of community transmission. In March 2020, in Brazil, the State of Goiás extended a set of restrictions on the operation of non-essential business, which ran through the beginning of April 2020, to include mining, resulting in the temporary suspension of mining activities at AngloGold Ashanti’s Serra Grande operations until that time. In these countries, the suspension of mining activities continued for the period during which the respective restrictions were in force. Any such emergency governmental action may have a material adverse effect on the AngloGold Ashanti’s operating and financial results, which may result in a negative impact on the company’s cashflows, funding requirements and overall liquidity.
The extent to which the COVID-19 pandemic will impact the company’s results will depend on the scale, duration and geographic reach of future developments, which are highly uncertain and cannot be predicted, including notably the possibility of a recurrence or “multiple waves” of the outbreak and new variants. There have been instances in which governmental restrictions have been re-imposed where infection rates have started to increase again and there is a risk that widespread measures such as strict social distancing and curtailing or ceasing normal business activities may be reintroduced in the future until effective treatments or vaccines have been developed and administered. 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.
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 Ghana, Guinea, 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 NGOs, therefore, have a significant impact on the general labour relations environment, including labour relations at an operational level and operational stability at times. Unions are characterised 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. 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 and championing broader political, economic and social 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. Furthermore, IndustriaALL, representing more than 50 million workers globally, is expected to continue 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.
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 at times may lead to interference with the company’s operations and results in conflict that presents a security threat to property and human life. The company’s operations and projects affected by artisanal and/or illegal small-scale mining are mainly situated in Tanzania, Ghana, Guinea, Brazil and Colombia. 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 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. The most significant security challenges have occurred in Tanzania, 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’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 one of AngloGold Ashanti’s operations, 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 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. If AngloGold Ashanti 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, pending issuance of permits required to continue the next phase of operations. The force majeure has been extended multiple times and will now expire in June 2021, after which such declaration will once more need to be extended in case the relevant permits have not been granted. However, there can be no guarantee that such declaration, if required to be extended, will be extended at that time. 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 in this section. 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. 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.
Risks Related to Our Corporate and Financing Structure and Strategy
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 impact of public health crises, epidemics or pandemics) 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.
Sales of large quantities of AngloGold Ashanti’s ordinary shares and 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 25.85 percent and the top 10 largest beneficially owned 36.24 percent of AngloGold Ashanti’s ordinary shares as at 31 December 2020. 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.
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.
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.
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 venture at Kibali in the DRC is 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 company that has overall management control of the Kibali project in the DRC and all major management decisions for this project, including approval of the budget, require board approval. If a dispute arises between the company and Barrick with respect to the Kibali 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 AngloGold Ashanti and its joint venture partners may lead to legal action, including litigation between the company 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.
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, Moody’s and Fitch have assigned sub-investment grade credit ratings to the Republic of South Africa and the South African sovereign ratings may have an adverse impact on the company’s credit ratings. Furthermore, AngloGold Ashanti operates in a number of jurisdictions which have a deteriorating credit quality. Any downgrade of AngloGold Ashanti, or its operational jurisdictional rating, 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.
The level of AngloGold Ashanti’s indebtedness could adversely impact its business.
As at 31 December 2020, AngloGold Ashanti had gross borrowings of $1.931 billion (2019: $2.033 billion and 2018: $1.989 billion), excluding all 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 outbreak of the SARS-CoV-2 virus responsible for COVID-19, which reached pandemic proportions, led to disruption and volatility in financial and capital markets. Any prolonged dislocations in financial and capital markets 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 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 assets, properties or companies, which may include producing, development as well as advanced stage exploration assets or properties. 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, fiscal, legal, regulatory and contractual risks. For example, there may be a significant change in the legal, regulatory and fiscal framework applicable to the company after it has completed a relevant transaction; commodity prices may also significantly change 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, business and operating cultures, which may exacerbate the risks described in this section. 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.
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.
Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to AngloGold Ashanti’s 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 the company’s revolving credit facilities bear interest rates in relation to LIBOR and our future indebtedness may bear interest at floating rates of interest. In July 2017, the UK Financial Conduct Authority (FCA), which regulates LIBOR, 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 AngloGold Ashanti’s current or future indebtedness may increase and the company may need to renegotiate its revolving credit facilities to replace LIBOR with a new standard, both of which may have an adverse effect on the company’s 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 AngloGold Ashanti’s liquidity, results of operations or financial condition.
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 significantly. 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, such as changes in interest rates;
•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;
•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 2020, the market spot gold price traded from a low of $1,469.80 per ounce to a high of $2,063.19 per ounce. Between 1 January 2021 and 19 March 2021, the market spot gold price traded between a low of $1,681.24 per ounce and a high of $1,949.35 per ounce. On 19 March 2021, the afternoon price for gold on the London Bullion Market was $1,744.74 per ounce. In addition to protracted declines, 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 $1,673.85 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 may have an impact on the price of gold. Demand for gold is also significantly impacted by trends in China and India, which account for the highest gold consumption worldwide. Government policies in these countries 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, despite its generally favourable impact on the market price of gold, the COVID-19 pandemic has been a driving factor behind weakness in consumer demand for gold throughout 2020, culminating in a 14 percent decline in annual demand to 3,759.6 tonnes, the first time demand remained below 4,000.0 tonnes per year since 2009.
Furthermore, the shift in demand from physical gold to gold-related investments and speculative instruments may exacerbate the volatility of the gold price. Slower consumption of physical gold, 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 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 or life of mine plans from those prices used previously to determine Ore Reserves or 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. Whilst, from time to time, AngloGold Ashanti may enter into gold price hedges on an ad hoc basis on a portion of its production, the company does not systematically do so. In addition, even when AngloGold Ashanti enters into gold price hedges, there is no certainty that such hedges will adequately protect the company against gold price volatility.
The price of silver has also experienced significant fluctuations in past years. During 2020, the price varied between a low of $11.98 per ounce and a high of $29.15 per ounce. On 19 March 2021, the price of silver was $26.25 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, including gold, copper and silver, 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 Brazilian real, Argentinian peso, Australian dollar, Ghanaian cedi and the South African rand. The weakness of the U.S. dollar against local currencies results in higher cost of sales and other costs in U.S. dollar terms. Conversely, the strengthening of the U.S. dollar lowers local cost of sales and other costs 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 2020, the company estimates that a one percent strengthening of all of the Brazilian real, Argentinian peso, Australian dollar, Ghanaian cedi and the South African rand against the U.S. dollar, other factors remaining equal, would have resulted in an increase in cost of sales and total cash costs per ounce of approximately $12 million and $4 per ounce, respectively. As a result of the sale of the company’s remaining South African operations, AngloGold Ashanti’s exposure to fluctuations in the strength of the South African rand has been reduced.
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 significant 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 financial derivatives intended to reduce exposure to changes in the oil price, such input cost protection strategies may not always be successful, and any of the company’s diesel consumption not covered by these derivatives will continue to be subject to market fluctuations.
The price of oil has fluctuated between $5.6 and $71.44 per barrel of Brent Crude in 2020. As of 19 March 2021, the price of oil was at $63.23 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 $0.70 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. On 19 March 2021, the price of flat hot rolled coil (North American Domestic FOB) was $1,255 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.
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.
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 evolution of the economic and security relationship, including trade arrangements, between the EU and the United Kingdom.
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.
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 resulted in disruption and volatility in global financial markets and capital markets and a significant decrease in global economic activity, which may have an adverse effect on worldwide demand for gold and may also materially adversely affect the profitability of the company’s operations or financial condition. Further deteriorations in economic conditions, as a result of the COVID-19 pandemic or otherwise, could lead to a further or prolonged decline in demand for gold and negatively impact our business. 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.
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 pricing or 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.
Electricity is currently used for most of AngloGold Ashanti’s 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. AngloGold Ashanti’s mining operations are substantially dependent upon a mix of electrical power generated by local power utilities and by own power generation plants situated at some of its operations. The unreliability of local power utilities in some of the developing countries in which AngloGold Ashanti operates could 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. For example, in Tanzania, government policies increased pressure on companies to utilise the national grid, which could adversely impact our mining operations in the country due to potential power quality issues.
Certain of AngloGold Ashanti’s 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.
Concerns about the integrity or reliability of the 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 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.
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 increasing inflation rate in Argentina which was recorded at 24.8 percent in 2017 and rose to 47.6 percent in 2018, 53.8 percent in 2019 and 42.0 percent in 2020. Hyper-inflationary reporting will be reflected in the financial statements of the company’s local subsidiaries. However, hyper-inflationary movements are not reflected in the group’s consolidated financial statements as AngloGold Ashanti’s local Argentinian subsidiary is deemed to have a U.S. dollar functional currency.
Other Regulatory and Legal Risks
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.
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 AGAC’s Santa María-Montecristo and La Colosa projects. See “Item 8A: Legal Proceedings—Colombia”. The company’s core mining concession contracts provide that the Colombian mining authority 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.
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.
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 GHG emissions reductions. In order to meet national reductions commitments, including a goal of “net zero” carbon or carbon neutrality by 2050 set by numerous jurisdictions, it is likely that additional measures addressing GHG emissions, including stricter GHG emissions limits, will be implemented in various countries in the future.
Such measures could require AngloGold Ashanti to reduce its direct GHG emissions or energy use or to incur significant costs for GHG emissions allowances or taxes, including as a result of 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 to reduce GHG emissions, as well as GHG monitoring and reporting and other obligations to comply with applicable requirements.
Certain 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.
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 Accounting 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 Exchange Act is recorded, processed, summarised 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”.
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 technologies 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 planning business applications, 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 late 2020, a threat to the company’s computer systems was detected and neutralised within hours in connection with the SolarWinds supply chain compromise which affected over 18,000 companies. The systems affected were limited to network monitoring applications in Brazil which monitored certain technology systems across the local network. In addition, there was a notable increase in phishing campaigns linked to COVID-19 in the second half of the year.
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 penalties for failure to comply with the South African Protection of Personal Information Act, No. 4 of 2013 (POPIA) are severe and may include an administrative fine of up to R10 million or imprisonment of up to ten years. The European General Data Protection Regulation (GDPR) may lead to administrative fines of up to €20 million or four percent of a company’s total worldwide annual turnover of the preceding financial year, whichever is higher. Also, the GDPR has a scope that extends beyond the borders of the EU and does not only affect EU operations.
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. Accordingly, there may be less publicly available information concerning the company than there is for U.S. public companies. For example, in 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 of 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. In addition, AngloGold Ashanti is not required to file periodic
reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the U.S. Securities Exchange Act of 1934, as amended (Exchange Act). As a result, investors 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.
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.
•Completion of the sales of the Moab Khotsong and Kopanang mines in South Africa for $300 million and $9 million, respectively.
•Announcement of a review of divestment options for assets in South Africa, Mali and Argentina.
•Sale of the remaining South African producing assets and related liabilities to Harmony for $200 million plus deferred consideration based on future production at the Mponeng mine.
•Completion of the sales of the Sadiola and Morila mines in Mali for cash proceeds of $25 million and $1 million, respectively.
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: 2020”, “Item 5A: Operating Results—Capital expenditure” and “Item 5B: Liquidity and Capital Resources”.
For information concerning the company’s divestitures, including the sale of the remaining South African producing assets and related liabilities announced on 12 February 2020 and completed on 30 September 2020, refer to “Item 5A: Operating Results—Discontinued operations”, “Item 18: Financial Statements—Note 9—Discontinued operations and assets and liabilities held for sale”.
4B. BUSINESS OVERVIEW
AngloGold Ashanti Limited (AngloGold Ashanti) is an independent, global gold mining company with a diverse portfolio of operations, projects and exploration activities across nine countries on four continents. While gold is our principal product, we also produce silver (Argentina) and sulphuric acid (Brazil) as by-products. We are currently developing two projects in Colombia, including the Quebradona mine that is expected to produce both gold and copper, and continuing exploration activities in the United States. The Company is headquartered in Johannesburg, South Africa. Measured by production, AngloGold Ashanti is the third largest gold mining company in the world.
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 ten operations and three projects in eight countries (excluding our South African assets and Sadiola and Morila mines, which were sold during the year) 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), sold during 2020;
•Africa region (Democratic Republic of the Congo, Ghana, Guinea, Tanzania and Mali - sold during 2020);
•Americas (Argentina and Brazil, and projects in Colombia); and
Over the past few years, AngloGold Ashanti has increased 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 seeks to align with global best practice in corporate governance. Our human capital is deployed in group support functions including planning and technical, strategy, sustainability, finance, human resources, legal and stakeholder relations. The planning and technical functions focus on identifying and managing operational opportunities, maintaining long-term optionality, and the use of our intellectual capital through a range of activities that include 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
As the pandemic unfolded and uncertainty increased, investors’ risk averseness navigated them towards gold. This influx into the gold market drove the market spot gold price up 25 percent year-on-year from approximately $1,517/oz (at 1 January 2020) to approximately $1,896/oz (at 31 December 2020). As a result, market spot gold price volatility skyrocketed, recording the variance between the highest ($2,064/oz) and lowest ($1,469/oz) market spot gold prices during 2020 at 40 percent. 2020 also included a new all-time high for the market spot gold price. The average market spot gold price was recorded at $1,772 per ounce for the full year 2020.
According to the World Gold Council (WGC), global investment demand grew 40 percent to a record annual high of 1,773.2 tonnes. Global gold-backed ETFs holdings grew by 877.1 tonnes during 2020, reaching record year-end holdings of 3,751.5 tonnes. Bar and coin investment of 896.1 tonnes was three percent higher year-on-year, with consistent growth coming through in the second half of the year.
On the other hand, higher gold prices and weak local currencies drove the domestic price of gold to historical highs, negatively impacting the demand for jewellery. In addition, the restriction on social gatherings further exacerbated the decrease in the
demand for jewellery. Total annual jewellery demand dropped to 1,411.6 tonnes (34 percent lower year-on-year), the lowest in the recorded history of the WGC annual data series.
Official reserves showed a mixed picture of buying and selling during 2020. In total, central banks added 273 tonnes to their reserves during the year, making 2020 the eleventh consecutive year of net buying. However, this was almost 60 percent lower than the multi-decade record of 668 tonnes added in 2019. Total supply fell in 2020 by four percent year-on-year to 4,633.1 tonnes, the largest annual decline since 2013. The drop was primarily due to disruptions caused by the pandemic. Mine production decreased by four percent year-on-year, while the global hedge book fell by 65.1 tonnes in 2020, more than reversing the small increase in hedging seen in 2019. Lockdown restrictions also impeded consumers’ ability to re-sell and the supply of recycled gold grew by only one percent despite record gold prices in every market. Nevertheless, the amount of recycled gold in 2020 (1,297.4 tonnes) marks the highest amount of recycling since 2012 (1,645.1 tonnes).
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—Mining companies face strong competition and industry consolidation”.
Subject to other factors and unforeseen circumstances, in the first quarter 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. We are not currently experiencing any supply shortages on critical consumables utilised in the production of gold across our global operations. In addition, our stocking strategies account for potential lead time variation and supply constraints, thus minimising the risk of changes in the marketplace. While commodity pricing is subject to volatility over time, we are currently realising stable pricing, and our contractual terms limit future changes.
Mining is a long-term business, and so our strategy aims to create sustained value over the period of our mining operations and beyond. This involves careful allocation of key resource inputs – the natural, human, intellectual, financial, manufactured, and social and relationship capitals – which are essential to achieving this aim.
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. These strategic areas, which guide decision-making, are aimed at generating increased cash flows; extending mine lives; creating an organic pipeline of economically viable orebodies; and enhancing our licence to operate. The overall aim is creating and preserving value.
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. To remain sustainable in the long term, we must live our values in the conduct of our business. This encompasses being accountable for our actions and decisions, and respecting all, including employees, communities and the environment. ESG principles are integrated into every aspect of our business.
•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”.
As part of the South African asset sale, AngloGold Ashanti Limited sold its remaining three mining rights in South Africa to Golden Core Trade and Invest (Pty) Ltd (Golden Core) and Harmony Gold Mining Company Limited pursuant to a sale agreement concluded on or about 12 February 2020, as amended and reinstated from time to time (SA Sale Agreement). These mining rights relate to operations in the West Wits area. For further information on the South African asset sale, see “Item 18: Financial Statements—Note 9—Discontinued operations and assets and liabilities held for sale—South African asset sale”.
Pursuant to the SA Sale Agreement, AngloGold Ashanti and Golden Core executed a notarial deed of cession of the mining rights with DMRE references GP 30/5/1/2/2/01 MR and GP 30/5/1/2/2/248 MR to transfer and cede these mining rights to Golden Core (Deed of Cession). The Deed of Cession has been lodged for registration at the Mineral and Petroleum Titles Registration Office (MPTRO) to transfer such mining rights from AngloGold Ashanti to Golden Core. While the registration of the Deed of Cession is still pending, the risk in, benefit of, and ownership of these mining rights between the parties shall be deemed to have passed to the cessionary on 30 September 2020, the date of the notarial execution of the Deed of Cession, pursuant to clause 2 of the Deed of Cession.
With respect to the mining right held under DMRE reference GP 30/5/1/2/2/11 MR, AngloGold Ashanti and Golden Core agreed to make an application in terms of section 102 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002 (MPRDA) at the Department of Mineral Resources and Energy (DMRE) after the closing date of the SA Sale Agreement requesting, among other matters, the incorporation of this mining right into the mining right with DMRE reference GP 30/5/1/2/2/01 MR (Harmony Consolidation Application). AngloGold Ashanti also executed a notarial conditional deed of abandonment pursuant to which it conditionally abandons this mining right in terms of section 56(f) of the MPRDA (Deed of Abandonment) on condition that ministerial consent is granted in respect of the Harmony Consolidation Application.
On the date of registration of the Deed of Cession and the grant of the Harmony Consolidation Application, AngloGold Ashanti will cease to be a holder of mining rights in South Africa. Once the transaction has been fully implemented, the general laws relating to mining outlined below will no longer be applicable to the company.
General laws relating to mining
The Mineral and Petroleum Resources Development Act
Mineral and Petroleum Resources Development Act, Amendment Act and Regulations
The MPRDA came into effect on 1 May 2004. The objectives of the MPRDA are, amongst other things, to allow for state sovereignty over all mineral and petroleum resources in the country, to promote economic growth and the development of these resources and to expand opportunities for the historically disadvantaged. Another objective of the MPRDA is to ensure security of tenure for the respective operations concerning prospecting, exploration, mining and production. By virtue of the provisions of the MPRDA, the state ensures that holders of mining and prospecting rights contribute to the socioeconomic development of the areas in which they operate. The Mineral and Petroleum Resources Development Amendment Act, No. 49 of 2008 (MPRDAA) was passed by the South African Parliament in 2008 and became effective on 7 June 2013. On 23 April 2004, the Minister of Mineral Resources and Energy (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) in order to implement the provisions of the MPRDA and MPRDAA. On 27 March 2020, the MRE Minister published the Amendments to the MPRDA Regulations for Implementation (Revised MPRDA Regulations) in Government Gazette No. 43172 under GNR. 420.
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.
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.
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 at the High Court of South Africa (Gauteng Division) to interdict the implementation of the Mining Charter, 2017 and set it aside. The MRE Minister undertook to suspend the Mining Charter, 2017 pending the outcome of the DMRE/Minerals Council application. On 4 April 2018, judgement was handed down by the High Court and on 12 August 2020, the Minerals Council released a media statement indicating that the MRE Minister had withdrawn the notice of appeal to 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 judgement remain relevant to mining right holders.
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. On 5 May 2020, the High Court of South Africa (Gauteng Division) heard the application for judicial review. On 30 June 2020, the High Court held that certain affected communities and trade unions that were party to the legal proceedings relating to the Mining Charter, 2017 should be joined to this review application in respect of the Mining Charter, 2018 as respondents. The High Court has not yet decided on the merits of this review application. A key provision of the Mining Charter, 2018 is that 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.
The BBBEE Act
The Broad-Based Black Economic Empowerment Act, No. 53 of 2003 (BBBEE Act) is a law of general application in respect of Broad-Based Black Economic Empowerment (BBBEE) and enables the Minister of Trade and Industry to drive BBBEE across all sectors of the economy. 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 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.
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, when land and any improvements thereon are expropriated for the purposes of land reform, the amount of compensation payable may be nil. 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. On 10 December 2019, the Constitutional Amendment Bill was referred to the National House of Traditional Leaders for comment by the end of January 2020. Provincial public hearings on the Constitutional Amendment Bill were held in February and March 2020. During May 2020, the Ad Hoc Committee to Amend Section 25 of the Constitution (Committee) met to discuss the extension of the mandate of the Committee, which would have lapsed at the end of May 2020. The Committee agreed that it should request an extension of its mandate until such time as gatherings are permitted, as the Committee had not completed its public hearings due to the COVID-19 pandemic. The Committee was re-established, pursuant to this request, on 30 June 2020. In order for the Constitutional Amendment Bill to be adopted by the South African Parliament, two-thirds of the members of the National Assembly, the lower house, and at least six out of the nine provinces of the National Council of Provinces, the upper house, must vote in favour of the amendment.
Draft Expropriation Bill
Separately, a draft expropriation bill (Expropriation Bill) was published for public comment on 21 December 2018. The Expropriation Bill was introduced in the National Assembly during October 2020 as the Expropriation Bill, 2020. The Expropriation Bill contains a provision to the effect that it may be just and equitable for nil compensation to be paid where land is expropriated in the public interest, having regard to all relevant circumstances, including if (i) the land is not being used and the owner’s main purpose is not to develop the land or use it to generate income, but to benefit from appreciation of its market value; (ii) an organ of state holds land that it is not using for its core functions and is not reasonably likely to require the land for its future activities in that regard, and the organ of state acquired the land for no consideration; (iii) notwithstanding registration of ownership in terms of the Deeds Registries Act, No. 47 of 1937, an owner has abandoned the land by failing to exercise control over it; (iv) the market value of the land is equivalent to, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land; or (v) the nature or condition of the property poses a health, safety or physical risk to persons or other property. Public hearings on the Expropriation Bill have not yet been held.
Environmental laws relating to mining
National Environmental Management Act
The MPRDAA repealed the sections in the MPRDA providing for 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”.
From an environmental perspective, given the wide scope of the statutory duty of care in South African environmental law, erstwhile land owners may be held liable for historic contamination by the regulatory authorities. The duty of care primarily applies to persons responsible for or in control of the activity that caused the pollution, which includes erstwhile landowners and operators. The “polluter pays” principle in South Africa enables the competent authority to seek recourse against various responsible parties based on their historical or current relationship to the source and receptor of degradation or pollution. The duty of care also applies retrospectively to significant pollution or degradation that occurred before the entry into force of NEMA (i.e., 29 January 1999), as well as significant pollution or degradation that arises or is likely to arise at a different time from the actual activity that caused the contamination (e.g., latent or residual impact) or arises through an act or activity of a person that exacerbates pre-existing contamination. The authorities can also seek compensation in respect of clean-up measures that it is required to take on behalf of the responsible parties and apportion liability amongst the responsible parties, which could technically include a historic landowner or mining company that caused the pollution. Although the purchasers of AngloGold Ashanti’s assets in South Africa have contractually assumed all environmental liability associated with its former South African operations and agreed to indemnify AngloGold Ashanti for the same, there remains a risk, at least theoretically, of statutory liability to the state.
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 S.A. (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.
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 in accordance with prior mining legislation. 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 or 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. 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.
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 in a way that minimizes the impact on 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.
Mining companies are required to grant a free-carried and non-contributory participation to the DRC government. The DRC government’s free participation was originally set at 5 percent, which was increased to 10 percent in respect of 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.
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 may be available under article 220 of the Reformed DRC Mining Code.
Tax laws relating to mining
The Reformed DRC Mining Code sets out an exclusive and comprehensive tax and customs regime that is 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 (subject to certain prerequisites) 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. In the DRC, Kibali is due certain refunds of VAT which, to date, remain outstanding. During 2020, AngloGold Ashanti recovered $2.23 million in the form of VAT offsets and refunds from its operations in the DRC. We believe that our attributable share of the recoverable VAT balance (including recoverable fuel duty and after discounting provisions) owed to us by the DRC government amounted to $69 million as of 31 December 2020. While an agreement was reached with the DRC government on the reimbursement of the refundable VAT in the last quarter of 2018, uncertainty remains regarding the timing and level of cash receipts and offsets against other taxes for purposes of the recovery of our VAT receivables in the DRC.
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.
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.
Foreign exchange control regime
The Reformed DRC Mining Code imposed new exchange control rules requiring that mining title holders repatriate onshore 60 percent of sale revenues received during the investment amortization period and 100 percent once the investment amortization is completed. As a result of these new rules, we were not able to fully repatriate dividends from our DRC operations to date. During 2020, AngloGold Ashanti repatriated $140 million from its operations in the DRC in the form of dividends received from Kibali (Jersey) Limited. Our attributable share of the outstanding cash balances awaiting repatriation from the DRC amounted to $424 million as of 31 December 2020. Our joint venture partner, Barrick Gold Corporation, which operates the Kibali gold mine, continues to engage with the DRC government regarding the Reformed DRC Mining Code and the cash repatriation.
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 Kibali gold mine is owned by Kibali Goldmines S.A. (Kibali) which is a joint venture between Barrick Gold Corporation (45 percent), AngloGold Ashanti (45 percent) and Société Minière de Kilo-Moto S.A. (SOKIMO) (10 percent) which represents the interest of the DRC government. AngloGold Ashanti and Barrick Gold Corporation each have a 50 percent interest in Kibali (Jersey) Limited which holds our effective 45% interest in Kibali. The Kibali gold mine is operated by Barrick Gold Corporation.
The Kibali gold project comprises ten permits, of which seven expire in 2029 and three in 2030. Those permits cover 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.
Except as otherwise provided in a specific mining lease, all immovable assets of the holder of a 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. A holder must exercise his rights subject to such limitations relating to surface rights as the LNR Minister may prescribe.
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
In 2004, AngloGold Limited and the Government of Ghana signed a stability agreement (Ghana Stability Agreement) governing certain aspects of the fiscal and regulatory framework under which the company would operate in Ghana for a period of 15 years following the implementation of the business combination between AngloGold Limited and Ashanti Goldfields Company Limited. Under the Ghana Stability Agreement, the Government of Ghana agreed, among other matters, to extend the term of the mining lease relating to the Obuasi mine until 2054 on terms existing prior to the business combination.
In June 2018, the Ghana Stability Agreement ceased to apply to the Obuasi mine as a result of the parliamentary ratification of a new development agreement and a new tax concession agreement in relation to the mine (as described below). However, the Ghana Stability Agreement continued to apply to the Iduapriem mine until it expired in April 2019. Since then, AngloGold Ashanti (Iduapriem) Limited (AGA Iduapriem) no longer benefits from the Ghana Stability Agreement. Relevant engagements are currently ongoing between AGA Iduapriem and the Minerals Commission to obtain a new agreement for the Iduapriem mine.
Obuasi Development Agreement
AngloGold Ashanti (Ghana) Limited (AGA Ghana) negotiated a new development agreement in relation to the Obuasi mine (Obuasi DA) with the Government of Ghana. On 21 June 2018, Parliament ratified the 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 with a concession period until 31 December 2027.
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 utilised for the purposes of calculating taxable income shall continue to be carried forward until 31 December 2020;
•For the concession period, 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);
•Until 31 December 2021, exemptions of certain items from Import Duty;
•For the concession period, 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;
•For the concession period, 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;
•For the concession period, 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 an autonomous office. 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. Recent directives impose that, in case of rotation of auditors, a mandatory cooling-off period of at least six years should be observed. To ensure a smooth transition, companies are required to effect this change at their next scheduled annual general meeting, but no later than 1 August 2022.
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 objectives as prescribed under Act 179. The implication of this change 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. A 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 Government of Ghana holds a Golden Share in AGA Ghana and the Obuasi DA confirms 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 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.
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 one Ghanaian cedi (GHS 1.0) 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 is entitled to attend any general meeting of the members or any separate meeting of the holders of any class of shares. Furthermore, 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 one Ghanaian cedi (GHS 1.0).
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).
Various amendments have been made to these tax laws over the years. For example, recently, the Revenue Administration (Amendment) Act, 2020 (Act 1029) amended the Revenue Administration Act, 2016 (Act 915) to establish an Independent Tax Appeals Board to hear and determine appeals against tax decisions made by the Commissioner-General.
The provision of goods and services is liable to Value Added Tax (VAT) at a revised rate of 12.5 percent. In addition, there are separate levies, including a 2.5 percent National Health Insurance Levy and a 2.5 percent Ghana Education Trust Fund Levy.
In November 2015, Parliament passed the Income Tax Act, 2015 (Act 896) (ITA) which repealed the Internal Revenue Act, 2000 (Act 592), as amended, and became effective from 1 January 2016. 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 (including capital gains), each separate mineral operation is treated as an independent business and taxed accordingly, preventing mining businesses from deducting or setting off costs from one mining area with another’s income. 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.
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.
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.
Minerals Income Investment Fund
The Minerals Income Investment Fund Act, 2018 (Act 978), which was amended by the Minerals Income Investment Fund (Amendment) Act, 2020 (Act 1024), establishes a fund to receive mineral royalties and related income from mineral rights holders and also provides for the disbursement and management of such royalties and related income. The Minerals Income Investment Fund also acts as a special purpose vehicle holding the Ghanaian Government’s carried interests in mining companies. No additional burdens are imposed on mining companies as the effect of this legislation is merely to substitute the legal person holding the Government’s carried interests.
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 to obtain an environmental permit prior to commencing operations. Environmental Management Plans must 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. In February 2021, the draft Mining in Forest Reserves Regulations were also sent to members of the Ghana Chamber of Mines for review. 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 criminalise 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.
Existing measures that were not amended by this notice continue to remain in force. 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 authorised by the Bank of Ghana.
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.
Localisation and local participation policy
Mining companies must submit a detailed programme for the recruitment and training of Ghanaians with a view to achieving “localisation”, which is the replacement of expatriate personnel in a company’s Ghanaian operations by Ghanaian personnel. In addition, mining companies must give preference to Ghanaian products and personnel, to the maximum extent possible, consistent with safety, efficiency and economies. The Minerals and Mining (General) Regulations, 2012 (L.I. 2173) give further details on the localisation policy. On 15 October 2020, the Minerals and Mining (Local Content and Local Participation) Regulations, 2020 (L.I. 2431) were adopted in order to expand the scope of local content requirements in the mining industry. The Minerals Commission is tasked to publish a local procurement list of goods and services that must have Ghanaian content. Mining companies must also submit a five-year procurement plan to the Minerals Commission. Technical and engineering services generally must be provided by Ghanaian-owned companies subject to limited exceptions. Only the services of financial institutions incorporated in Ghana are to be procured and not less than 25 percent of transactions are required to be undertaken with financial institutions owned by Ghanaian citizens. Other services such as haulage, security, contract mining services for small-scale mining operations and supply of fuel are required to be provided by Ghanaians. Furthermore, if the planned capital expenditures of a holder of a mineral right exceeds certain limits set by the LNR Minister, it is required to list at least 20 percent of its equity on the Ghana Stock Exchange within five years after commencement of mining operations. In addition, there are also restrictions on the number of expatriates that can be employed by mineral rights holders and mine support service providers in a bid to enhance the participation of Ghanaians in the mining industry.
Imposition of restrictions
In March 2020, the Imposition of Restrictions Act, 2020 (Act 1012) was enacted to put in place measures to address the COVID-19 pandemic. It gives the President power to impose restrictions on persons in the event of an emergency, disaster or similar circumstance to ensure public safety, public health and protection. Numerous executive instruments have been issued in exercise of this power conferred on the President pursuant to this legislation to manage the pandemic.
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 AGA 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. On 15 January 2021, the Minerals Commission approved AGA Ghana’s application to relinquish a further 60.24 km2 of lease area, thereby reducing the lease areas to 141.22 km2, in order to avoid encroachment and illegal mining activities within the mine’s footprint while maintaining its social license to operate.
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 operates under 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 Mining Lease (28.10 km2). Prior to all four mining leases expiring in 2018 and 2019, AGA Iduapriem submitted all relevant documents to apply for renewal of the leases. On 17 February 2020, the mining leases were extended for a further period of 15 years and will now expire in 2035. The Ajopa Mining Lease and the Ajopa South Mining Lease were ratified by the Ghanaian Parliament on 15 July 2020. The Iduapriem Mining Lease and the Teberebie Mining Lease were both ratified on 22 December 2020.
AGA Iduapriem is required to pay an annual mineral right fee of $178,000 with respect to the Iduapriem Mining Lease, $136,000 with respect to the Teberebie Mining Lease, $134,000 with respect to the Ajopa South Mining Lease and $220,000 with respect to the Ajopa Mining 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 implemented by various decrees and orders, 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, Decree D/2017/285/PRG/SGG was adopted, which sets forth the conditions for the constitution and management of the Local Development Fund (Fodel), as well as Joint Order A/2017/6326/MMG/MATD/SGG, which sets forth the conditions for the use, management and control of the Fodel. Together, these set forth the use of the mining companies’ financial contribution to the development of the local communities and the rules applying to the Fodel, which was created under the Guinea Mining Code. In addition, Joint Order AC/2017/3228/MATD/MMG/SGG, issued by the Ministry of Territorial Administration and Decentralisation and the Ministry of Mines and Geology and dated 21 July 2017, updates the act on the establishment, attribution and functioning of the coordination committees in mining communities (CCLMS). The main purpose of the CCLMs, in which all concerned mining companies are represented, is to prevent and settle disputes that may arise in mining communities. On 13 July 2018, a Joint Order A/2018/5212/MEF/MMG/MB/MATD/SGG was issued, which regulates the use, management and monitoring of the resources allocated to local authorities pursuant to article 165 of the Guinea Mining Code. In 2019, an inter-ministerial committee was created to supervise and control the Fodel through the adoption of Joint Order AC/2019/089/MMG/MATD/SGG setting out the conditions for the constitution, powers and management of said inter-ministerial committee.
On 16 June 2020, a new procedure for the export of gold by mining companies was enacted through the adoption of Decree D/2020/113/PRG/SGG, which sets out, amongst other things: (i) when the industrial production tax referred to in article 161-1 of the Guinea Mining Code shall be paid, and (ii) the process to be followed to export gold bullion.
AngloGold Ashanti’s rights and permits
The right to undertake mining operations in Guinea can only be obtained by one of the following mining titles: surveying permit, small-scale mining licence, exploration licence, mining licence or mining concession.
The group’s Guinean subsidiary, Société AngloGold Ashanti de Guinée S.A. (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 in 1993 and amended in 2005. On 28 June 2016, SAG and the Government of Guinea concluded a revised and consolidated mining convention (Revised Convention de Base) which encompasses a renewal of the term of the original mining convention and other amendments necessary to support an expansion project 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 (Judgement 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). It replaced the original mining convention and became effective on 24 January 2017.
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; the term of the Mining Concession is 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 benefits from 5-year income tax holiday 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 totaling 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 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 primarily regulated 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) and Decree No. 2020-0177/PT-RM dated 12 November 2020 implementing the 2019 Mali Mining Code. On 8 December 2020, Decree No. 2020-0288/PM-RM enacted the new model mining convention referred to in Decree No. 2020-0177/PT-RM.
The 2019 Mali Mining Code applies to the mining operations previously carried out by AngloGold Ashanti entities in Mali (as further described below) 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.
Exploration and prospecting activities are carried out under exploration authorisations (autorisation d’exploration) or exploration permits (permis de recherche). Exploration authorisations and exploration permits give their holder the exclusive right to carry out exploration activities over a given area. Exploration authorisations are granted for a non-renewable period of three months, while exploration permits are granted for a period of three years renewable twice for additional 3-year periods. Applications for exploration authorisations 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 authorisations 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 commercialisation 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) and 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. 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.
All mining titles mentioned above (save for the exploration authorisation) 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 the Morila, Sadiola and Yatela gold mines, all of which were 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 together with its joint venture partner Barrick Gold Corporation completed the sale of their entire interests in Société des Mines de Morila S.A., the company operating the Morila gold mine in Mali, to Firefinch Limited (previously named Mali Lithium Limited) on 10 November 2020. At the time of the sale, mining of ore had ceased at the Morila gold mine.
AngloGold Ashanti together with its joint venture partner IAMGOLD Corporation completed the sale of their entire interests in Société d’Exploitation des Mines d’Or de Sadiola S.A., the company operating the Sadiola gold mine in Mali, to Allied Gold Corp on 30 December 2020. At the time of the sale, mining of ore had ceased at the Sadiola gold mine.
In April 2017, Société d’Exploitation des Mines d’Or de Yatela S.A. (Yatela), the company operating the Yatela gold mine, began the implementation of a closure plan in order to relinquish the property. In February 2019, AngloGold Ashanti and its joint venture partner IAMGOLD Corporation announced an agreement to sell each of their 40% interests in Yatela to the Government of Mali, which holds the remaining 20% interest. The transaction is subject to the fulfilment or waiver of a number of conditions precedent and AngloGold Ashanti remains committed to its completion despite recent political instability and related events in Mali which have delayed completion of the sale from the originally anticipated timeline. 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; Mining (Audit and Inspection of Records) Regulations, 2018; and Mining (Designated Minerals Certification) Regulations, 2019. 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 prevent the occurrence of matters prohibited by the laws of Tanzania. The Code also requires every investor to sign and submit an integrity pledge.
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 and 2019 and, together with an Executive Order introducing, introduced 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;
•Establishment of various Tanzanian bodies, including the (i) Geological Survey, (ii) Mineral and Gem Houses, (iii) National Gold and Gemstone Reserve, (iv) Government Minerals Warehouse, (v) National Minerals Resources Data Bank, and (vi) Mining Cadastre;
•Introduction of a statutory procedure for the conduct of Corporate Social Responsibility (CSR), whereby a company is required to prepare annually a 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, with rights over such licences to 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, the company believes the listing requirement conflicts with the mining development agreement.
In September 2020, the Government of Tanzania published the Mining (Minimum Shareholding and Public Offering) (Amendment) Regulations, 2020, by means of Government Notice No. 181, which exempts companies holding special mining licences from local listing requirements if such mining company has entered into an agreement with the Government of Tanzania that provides for a non-dilutable free-carried interest in such mining company and an economic benefits sharing arrangement.
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 were stayed until 12 March 2021 in order to afford the parties the opportunity to achieve an amicable resolution of the dispute and as a result of the impact of the COVID-19 pandemic. On 15 March 2021, and due to continuing COVID-19 issues in sub-Saharan Africa, we requested a further extension to stay the proceedings. This request is pending with the arbitral tribunal.
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”.
Categories of 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.
Three categories of licences can be applied for under the Tanzania Mining Act: licences for exploration, licences for mining, and licences for ancillary activities. Licences for exploration include prospecting licences and gemstone prospecting licences. Licences for mining include special mining licences (if the proposed capital investment is equal to at least USD 100 million), mining licences (if the proposed capital investment is equal to between USD 100,000 and USD 100 million) and primary mining licences (reserved for Tanzanian citizens). Licences for ancillary activities include processing licences, smelting licences and refining licences. 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. 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.
An application for a prospecting licence is made to the Mining Commission and the licence, once granted, 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. A prospecting licence is not freely transferable and requires the Mining Commission to register 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. 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.
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. 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. A special mining licence holder may, in certain circumstances, unilaterally amend the programme of the mining operations agreed with the MEM.
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).
Tax laws relating to mining
The Finance Act, 2015 (No. 16) came into force on 1 July 2015 and 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 both imposes and revises 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
Effective 20 July 2017, the Value Added Tax Act, 2014 (No. 5) (VAT Act) was amended by the Written Laws (Miscellaneous Amendments) Act, 2017 (No. 7) in order to restrict VAT relief for VAT input tax paid by mining companies on goods and services. Prior to the enactment of this amendment to the VAT Act, mining companies were entitled to 100% VAT relief in respect of the goods and services they purchased. The amendment prohibits refunds for VAT input tax incurred on a series of raw products, including the exportation of “raw minerals”. Subsequently, the Tanzania Revenue Authority (TRA) denied our applications for VAT input credit refunds, which amounted to a total of $139 million as of 31 December 2020, covering the period from July 2017 onwards, on the basis that all of the gold doré that we export constitutes “raw minerals” for purposes of the VAT Act. In response, the company filed formal notices of objection with the TRA stating that the exportation of gold doré is, in its view, not covered by the restriction since doré does not fall within the category of “raw minerals” as used in the VAT Act. On 22 February 2019, the Tanzania Mining Act was amended by the Written Laws (Miscellaneous Amendments) Act, 2019 (No. 2) to introduce a definition for “raw minerals” which supports our interpretation that gold doré is excluded from the prohibition. On 1 July 2020, the Finance Act, 2020 (No. 8), amended the VAT Act, without retrospective effect, in order to remove the restrictions on VAT input tax credits for the exportation of “raw minerals” as well as a series of other raw products. This recent amendment confirms the technical basis for VAT input tax recovery for mineral exporters from July 2020 onwards. Discussions with the TRA are ongoing to resolve our historical claims for VAT input credit refunds for the period from July 2017 to June 2020, while VAT claims from July 2020 onwards are subject to verification procedures by the TRA before any refunds will be received.
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 amount to 0.1 percent of the total project costs or the minimum amount of TZS 25 million (approximately $11,000). 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 which 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 be satisfied 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. In addition, the Non-Citizens Act introduced the Short-Term Permit (STP) which 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.
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. The TAA also mandates that all concessions, contracts and licences are made public as well as all revenue collected from the extractive industry. Further implementing regulations require companies in the extractive industry to keep records of payments, beneficial ownership information, cost of production, exploration, prospecting, award or transfer of license, capital expenditure, volume of production and export date in respect of the granted licence.
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). In January 2020, it also published implementing regulations, including the Natural Wealth and Resources (Review and Re-negotiation of Unconscionable Terms) Regulations, 2020 and the Natural Wealth and Resources (Permanent Sovereignty) (Code of Conduct for Investors in Natural Wealth and Resources) Regulations, 2020.
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.
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.
A term is considered “unconscionable” under the Unconscionable Terms Act if, among other grounds, the requirements or provisions of the agreement restrict 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, secure preferential treatment designed to create a separate legal regime to be applied discriminatorily for the benefit of a particular investor, deprive the people of Tanzania of the economic benefits derived from subjecting natural wealth and resources to beneficiation in the country, or subject the state to the jurisdiction of foreign laws and foreign courts or tribunals.
Tanzania Shipping Agencies Corporation
In February 2019, the Tanzania Shipping Agencies Corporation (TASAC) issued a public notice informing the general public that, effective 4 March 2019, all clearing and forwarding services relating to import and export of goods and items as specified under
section 7(1)(a) of the Tanzania Shipping Agencies Act, 2017 (No. 14), which include minerals, mineral concentrates and products and extracts related to minerals, shall exclusively be handled by TASAC. Concerned about the impact on their operations, mining companies as well as other interested parties lodged an appeal to the Minister of Transportation. As a result, the effective date of the notice was delayed and the imposition of prescribed fees was suspended, while TASAC continued to provide services to its clients. On 5 February 2021, the Government published the Tanzania Shipping Agencies (Shipping Business Fees, Charges and Commission) Order in the Government Gazette through Government Notice No. 181 of 2021, which reduced the prescribed fees and eliminates certain other charges for the clearing and forwarding services provided by TASAC, including in connection with the handling of the company’s export of gold bullion and import of certain goods.
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, in the state of Western Australia, the Mining Act 1978 (WA) provides that an applicant for the grant of, or the holder of, a mining tenement is responsible for native title compensation, if determined to be payable, to native title holders.
Federal, state and territory Aboriginal and non-Aboriginal heritage laws operate in parallel to the native title legislation. State and territory heritage laws 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 (including 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 (including a public consultation period) pursuant to applicable environmental protection legislation prior to commencement. Further, a works 'construction' approval and 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, further separate approval may be required for the removal of native vegetation within the tenement, and the taking and use of water for exploration and mining operations.
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 13 exploration permits covering 358,700 hectares. Each permit is granted with an initial term of five years, renewable for two further periods of not more than five years each.
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 three 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. (CVSA) 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 three percent of the gross value of commercialised 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 one percent to three percent calculated at pit-head value of the mineral extracted thus bringing it to the cap of the Mining Investment Law.
Foreign exchange control regime
On 1 September 2019, by means of Executive Decree No. 609/2019 (Decree), the Argentinean national government reinstated foreign exchange and export controls. The Decree and related regulations of the Central Bank of Argentina impose, 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 de cambios) the countervalue (contravalor) from their exports of goods within a specified time period. This period depends on the goods exported and the relationship between the Argentinean exporter and the foreign importer and ranges from 15 to 365 calendar days counted as of the date on which the Argentinean customs authorities certify the shipment to the export destination. Regardless of the applicable maximum term, the proceeds from the export must be transferred and sold in the Argentinean foreign exchange market no later than five business days from the date of collection.
The export of goods is regulated by Communication “A” 6882 of the Argentinean Central Bank (as modified) which establishes the specific regulatory requirements in order to implement the measures adopted by the national government in this area. In accordance with these Central Bank regulations, the exporter shall select a financial institution to track each export transaction through the SECOEXPO (Seguimiento de las negociaciones de divisas por exportaciones de bienes) tracking system which is administered by the Argentinean Central Bank. The selected financial institution must determine the amount and deadline to settle the export proceeds and shall register the amounts allocated to each export transaction in the tracking system. Upon the expiration of the applicable term to transfer and sell the export proceeds, the designated financial institution must inform the Argentinean Central Bank, through the SECOEXPO tracking system, if the exporter has complied with its obligations or not.
As a general rule, prior approval of the Argentinean Central Bank is required to access the foreign exchange market for transactions relating to the outflow of funds, except in certain circumstances. For example, no prior approval is required when all holdings in foreign currency in Argentina are deposited in accounts with financial institutions and the amount of “liquid external assets” available at the beginning of the day in which access to the foreign exchange market is effected is lower than the equivalent of $100,000. “Liquid external assets” include, among others: holdings of foreign currency bills and coins, coined or good delivery gold, demand deposits in foreign financial institutions and other investments which allow for immediate liquidity in foreign currency (such as investments in foreign government securities, funds in investment accounts held abroad, crypto-assets, funds in payment service providers, etc.). Reserve or guarantee funds created under financing transactions or derivatives transactions entered into abroad are not considered liquid external assets. There are also certain circumstances in which the $100,000 limit will not be considered to have been exceeded. Furthermore, the Argentinean Central Bank is not required to give prior approval when a commitment is given to settle through the foreign exchange market, within five business days of their availability, any funds received abroad as collection of (i) loans granted to third parties, (ii) term deposits, or (iii) the sale of any kind of asset, when each of such had been granted, created or purchased after 28 May 2020. In addition, no prior approval is required when the client files an affidavit stating that: (i) as of the date on which access to the foreign exchange market is requested it has not sold securities against foreign currency in Argentina or transferred such securities to depository entities abroad in the past 90 calendar days, and (ii) undertakes not to arrange sales of securities against foreign currency in Argentina or transfers thereof to depository entities abroad from the moment it requires access and for the subsequent 90 calendar days.
From 30 December 2020 until 31 March 2021, prior approval from the Argentinean Central Bank is not required for payments in connection with the import of goods if certain conditions are satisfied. To qualify, the financial entity should hold an affidavit from its client stating that the total amount of payments associated with its imports of goods made through the foreign exchange market as from 1 January 2020, including the intended payment, does not exceed by more than $1 million the amount resulting from the following sum:
•The amount for which the importer would have access to the foreign exchange market when calculating imports of goods under the SEPAIMPO (Sistema de seguimiento de pagos de importaciones) monitoring system and that were made official between 1 January 2020 and the day prior to accessing the foreign exchange market; plus
•The amount of deferred or on-demand payment of imports of goods of the following transactions not included in the previous point: (i) operations shipped as from 1 July 2020 or previously shipped that have not arrived in Argentina before that date, (ii) aimed to cancel commercial debts with export credit agencies, foreign financial entities or guarantees thereof, (iii) made by the public sector, business organizations where the Argentinean government has majority participation or public trusts, (iv) with pending customs registration of supply of critical medicines, and (v) purchase of kits for the detection of COVID-19; minus
•The amount pending to be regularised for repayment of imports with pending customs registration made between 1 September 2019 and 31 December 2019.
CVSA had a cash balance of $137 million equivalent as at 31 December 2020, of which $50 million is currently eligible to be declared as dividends. Application has been made to the Argentinean Central Bank to approve $11 million of this eligible amount to be paid offshore to the company, however, approval remains pending. The cash is fully available for CVSA’s operational requirements.
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 eight percent of the taxable value or official FOB price. On 2 October 2020, the national government published Decree No. 785/2020
(Export Duties Decree) which sets an export duty rate of eight percent for certain goods, including doré bars and gold alloys. The Export Duties Decree will be applicable until 31 December 2021 and revokes the provisions of Decree No. 793/2018 which had previously set the export duty at 12 percent ad valorem. These export duties, if not compensated with other tax reductions, affect the tax stability guarantee granted to 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 (RC 4428/2019) establishing an administrative procedure to be followed in order to obtain the reimbursement or compensation of federal taxes paid in excess of the total tax burden provided for by the applicable tax stability guarantee. CVSA initiated this new procedure in order to claim compensation for the export duties it paid in 2018 and 2019 as export duties are not contemplated by its tax stability guarantee. Prior to the publication of RC 4428/2019, CVSA had already submitted to the tax authorities claims for reimbursement of the export duties it paid from 2008 to 2015.
Pursuant to the new administrative procedure, the National Mining Secretariat issued a favorable opinion regarding CVSA’s claim in respect of fiscal year 2018, which amounted to approximately $4.0 million as of 31 December 2020. This claim is currently under review by the relevant customs authorities. The National Mining Secretariat has not yet issued an opinion in respect of CVSA’s claim in respect of fiscal year 2019, which amounted to approximately $12.3 million as of 31 December 2020.
Furthermore, CVSA has requested the tax authorities to apply the procedure provided for in RC 4428/2019 in respect of its historical claims for fiscal years 2008 to 2015 during which the imposition of export duties also exceeded CVSA’s total tax burden under its tax stability guarantee. However, these claims, which amounted to approximately $6.1 million as of 31 December 2020, are still being reviewed under the rules to challenge export duties instead of the new procedure provided for in RC 4428/2019. CVSA has appealed the application of those rules and a decision on this issue is pending.
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 CVSA 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. CVSA is a corporation incorporated in Argentina indirectly controlled by AngloGold Ashanti, with Fomicruz as minority shareholder. On 14 August 1996, CVSA 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 state of Minas Gerais, gold ore is exempted from the collection of this new duty. At the end of 2020, the state of Goiás created a new tax (duty) on research, extraction and exploration activities carried out in this state at a rate of BRL10.38 per ton of ore sold, which currently still needs to be implemented.
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, executive, legislative and judiciary bodies, both at the federal and state levels, have generally increased scrutiny of mining operations in Brazil, and of TSFs in particular, and 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.
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 operators to cease all storage and disposal activities at TSFs (known as “deactivation” or “desativação”) constructed or heightened upstream or by an “unknown” method by 15 September 2021 as well as to decommission 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 (a process known as “decharacterization” or “descaracterização”). 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. To comply with the terms of ANM Resolution No. 13/19, the mine will also need to decommission the Serra Grande tailings dam by 15 September 2025. The company has begun the process of transitioning to dry-stacking operations for tailings storage.
Furthermore, Federal Law No. 14.066/20, adopted in September 2020, also imposes requirements on companies to close and decommission upstream TSFs, including our Serra Grande tailings dam, by 25 February 2022 (which date is earlier than required by ANM Resolution No. 13/19). However, Federal Law No. 14.066/20 does permit extensions of the compliance deadline, with the consent of the ANM based on the technical plan for decommissioning. Neither ANM Resolution 13/19 nor Federal Law No. 14.066/20 requires removal of all tailings material in connection with the decommissioning of TSFs. AngloGold Ashanti expects to transition to dry-stacking operations at Serra Grande in advance of the required closure deadline for the Serra Grande tailings dam. With respect to downstream (or “centerline”) TSFs, Federal Law No. 14.066/20 requires companies, to the extent that communities are located in the self-rescue zone of those TSFs, to implement one of the following measures for such structures: either (i) the structure must be deactivated 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, deactivation and decommissioning of those TSFs will be required at the end of the life of the mine. All of the TSFs operated by AngloGold Ashanti in Brazil have communities located in self-rescue zones. AngloGold Ashanti expects to transition to dry-stacking operations for tailings storage at each location in Brazil in the near term and to decommission each of these dams in accordance with their closure plans. According to current estimates, capital expenditures in 2021 required to implement this new technology will be in excess of $70 million.
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, establishes bond requirements and holds management liable for non-compliance with its provisions. The administrative requirements to implement certain provisions of Law No. 23.291/19 have not yet been issued.
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 Sítio 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 national 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 registered. 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 national 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, during which time the specified timelines for completing the various phases of the mining project under the concession contract are suspended, will expire on 22 June 2021. 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 integrated mining concession contract (EIG-163) which covers a total area of 9,210 hectares and expires on 28 February 2037.
Minera de Cobre Quebradona S.A.S. B.I.C. (MCQ) which manages the Quebradona project, obtained the integration of concession agreement 5881 in October 2016 and registered in December 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 fifth year of the integrated exploration phase. The permits for the construction and mining operation are currently being assessed by the relevant mining authority (Secretaría de Minas de Antioquia) and the National Environmental Licensing Authority of Colombia (ANLA) is reviewing the environmental study.
The Gramalote project is organised as a joint venture between AngloGold Ashanti (through AGA Colombia Holdings Limited and AngloGold Ashanti Holdings plc) and B2Gold (through B2Gold Corp. and Graminvest Ventures Limited). Gramalote Limited, a
company incorporated under the laws of British Virgin Islands which is the legal vehicle operating the joint venture, established a Colombian branch, Gramalote Colombia Limited (GCL), to carry out activities in Colombia and obtain the mining concession contracts necessary to develop the Gramalote project. The Gramalote joint venture has been operated by B2Gold since January 2020. Pursuant to an integrated mining concession contract No. 14292, GCL was granted the exclusive right to explore, take ownership and dispose of the mineral reserves (ore) extracted from the concession area until April 2043. GCL has the right to request an extension of the operating period for up to 20 years, and, if exercised, such request to extend must include new technical, economic, environmental and social studies that demonstrate the status of the mineral resources. Currently, concession contract No. 14292 is in the phase of construction and assembly, pending resettlement of communities and the formal start of construction activities. GCL has received an environmental licence granted by the National Environmental Licensing Authority of Colombia (ANLA) and permits for the construction and mining operation which were approved by the relevant mining authority (Secretaría de Minas de Antioquia).
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 the Silicon Project, located on federal lands covering an area of approximately 5,700 acres. Additionally, a further 1,414 mining claims (29,215 acres) 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. Many of 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. Four amendments to the Notice of Decision have been authorized by the BLM in letters dated 31 January 2018, 2 April 2018, 4 October 2018, and 4 March 2020.
AngloGold Ashanti (U.S.A.) Exploration Inc. has completed a subsequent permitting process for the Silicon Project to increase the exploration activities beyond the 5-acre notice level under federal and state law. This process was initiated in 2019 with the completion and submission of the required environmental baseline studies and the submission of a Plan of Operations and Reclamation Plan to the BLM and the state of Nevada Bureau of Mining Regulation and Reclamation (BMRR). In April 2020, the BLM published for public comment an environmental assessment for the Silicon Project as part of the subsequent permitting process. The comment period for the environmental assessment closed on 5 June 2020. On 24 July 2020, the BLM issued a Finding of No Significant Impact (FONSI) and Record of Decision approving the Plan of Operations and Reclamation Plan, subject to certain bonding requirements. On 31 July 2020, the BMRR also approved the Plan of Operations and Reclamation Plan and issued Reclamation Permit 0404. AngloGold Ashanti North America Inc., the owner of the Silicon Project, has subsequently increased its reclamation bond to $615,302. On 17 August 2020, Basin and Range Watch, Western Watersheds Project and Great Basin Resource Watch, three local opponents to the Silicon Project, filed a Notice of Appeal regarding the BLM’s FONSI and Record of Decision. The company is not required to suspend project work while the appeal is being considered. The aforementioned Notice of Decision for the Silicon Project and its four amendments are now part of the Silicon Project Plan of Operations.
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.
The BLM issued a Notice of Decision for the Transvaal Project approving the proposed exploration operations on 19 October 2020. The Transvaal 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 505 unpatented mining claims.
Although BMRR also regulates mining within the state of Nevada, 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 Rhyolite North and Transvaal exploration programs fall within this exemption.
In addition, AngloGold Ashanti (U.S.A.) Exploration Inc. intends to conduct exploration activities on four new projects in western Nevada. Those projects include Midnight Star (553 claims; 11,425.62 acres), Admiral (686 claims; 14,173.55 acres), Atlantis (613 claims; 12,665.29 acres) and Caspa (269 claims; 5,557.85 acres), totalling 2,121 new claims for 43,822.31 acres. These projects will be subject to the same regulatory requirements as our current projects in Nevada.
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 has closed 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. In June 2020, former President Trump signed an executive order directing certain federal agencies to streamline the review processes associated with permitting of infrastructure and natural resources projects. While this executive order may favorably affect the timing of our permit and project approvals, its impact is yet to be determined and remains uncertain.
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 requirements, standards or conditions were adopted in the future that imposed additional or new obligations or costs on AGA in connection with our exploration or extraction activities in the United States, 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 and Ghana, 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 group 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 and discontinued operations) increased from $634 million in 2019 to $674 million in 2020. This increase mainly relates to 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.
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 GHGs); 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 and Ghana, 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 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, industry standards and commitments made to local communities. The occasional well-publicised failure of a third-party TSF 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 both by the Brazilian National Mining Agency (ANM) Resolution No. 13/19, issued in August 2019, and by Federal Law No. 14.066/20, adopted in September 2020, and decommissioning of all existing upstream TSFs has been ordered. As a result, we will be required to reinforce, and to cease storage and disposal activities at, the TSF (known as “deactivation” or “desativação”) at our Serra Grande mine, located in the state of Goiás, by 15 September 2021. In addition, the Serra Grande mine TSF must be decommissioned by 15 February 2022, though that deadline could potentially be extended, up to 15 September 2025, with the consent of the ANM based on the technical plan for decommissioning. The incremental costs for reinforcing the walls of this facility and, ultimately, for deactivating and decommissioning the TSF in compliance with new legislation and regulations are expected to be material. We will also be required to reinforce or decommission all TSFs in Brazil constructed based on the downstream or “centerline” design method. AngloGold Ashanti expects to transition to dry-stacking operations for tailings storage at each location in Brazil in the near term and to decommission each of these dams in accordance with their closure plans. According to current estimates, capital expenditures in 2021 required to implement this new technology will be in excess of $70 million. Neither ANM Resolution No. 13/19 nor Federal Law No. 14.066/20 requires complete removal of tailings material (a process known as “decharacterization” or “descaracterização”) from TSFs. Further amendments to the regulatory requirements in Brazil governing such TSFs and related dams may be adopted in 2021. See “Item 4B: Business Overview—The Regulatory Environment Enabling AngloGold Ashanti to Mine”.
In addition, AngloGold Ashanti has committed to implement a new Global Industry Standard on Tailings Management, established in August 2020 by a panel comprised of industry and NGO experts, at its 22 TSFs in Africa, Australia and Brazil within the next five years, the costs of which are not expected to be material to AngloGold Ashanti.
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. For example, in Tanzania, a concept study for in-situ bioremediation project which uses naturally-occurring bacteria to reduce sulphate and nitrates in groundwater was undertaken in 2020 downstream of Geita mine’s TSF. Early results are encouraging, and the plans to roll out a phased project to address groundwater downstream of the TSF are in process.
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.
Climate Change and GHG Regulation
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.
Such 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 national GHG reduction target of 36.1 percent to 38.9 percent below the projected emissions in 2020 for “business as usual”. The policy required the development of sector-specific plans in order to meet the target. Amongst other plans, it was 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 2015, Brazil announced, in connection with its commitments under the Paris Agreement, economy-wide absolute mitigation targets providing for a 37 percent reduction in GHG emissions by 2025, as compared to 2005, and a goal to reduction emissions by 43 percent by 2030 compared to 2005 levels.
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 percent above its safeguard threshold, the cost of which was immaterial. Two recent amendments to the Safeguard Mechanism (Rule 2015) enacted in March 2019 and May 2020 allowed for the application of transitional calculated baselines using estimated CO2-e emissions intensities. Based on the production and emissions forecasts, the Australian mining operations applied to use transitional calculated baselines in 2020 for Sunrise Dam and Tropicana, which were approved by the Clean Energy Regulator effective 1 July 2019 to 30 June 2022 for both operations. Accordingly, assuming our operations (and resultant emissions) are consistent with the forecasts in our current business plan, the Australian mining operations should be able to avoid purchasing emissions offsets for the business during this period. In any event, the cost of such offsets, if ultimately required to be purchased, including due to a change in our operations under our business plan prior to June 2022, are not anticipated to be material to our business.
In 2020, AngloGold Ashanti formed a new internal Climate Change Working Group (CCWG), whose members are drawn from key functions across our operating regions, to lead the development of an updated climate change response for the company, including medium term GHG emissions reduction targets which are expected to be announced in 2021.
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. Under the CCWG’s leadership and in consultation with external consultants, physical climate risk assessments were undertaken in 2020 for all our operations using current climate models for different projected scenarios and climate adaptation plans were outlined. These adaptation plans will continue to be further refined in 2021.
Occupational and Community Safety and Health and Tropical Diseases
Safety is a significant focus of concern for AngloGold Ashanti. AngloGold Ashanti is subject to a variety of laws and regulations in each of the jurisdictions where the company operates that are 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.
Our board of directors seeks to ensure that safety remains AngloGold Ashanti’s first priority and the Social, Ethics and Sustainability Committee is rigorous in overseeing the implementation of the group safety strategy. The group safety strategy is aligned with recognised leading practice in global safety standards and systems. AngloGold Ashanti has made significant strides in improving safety in recent years, by developing a systematic and integrated safety strategy executed by the executive and senior operational leadership teams. Sadly, we lost six colleagues during 2020, but a continuous improvement in the recorded all injury frequency rate has been observed over the majority of the operations. Safety 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 serious injury and harm for our employees and contractors. During the revision of the Group Safety Strategy, a number of areas were considered: looking at eliminating both high consequence low-frequency events and low consequence high-frequency incidents through critical control management; introducing engineering and higher order controls; and improving organizational culture and behaviour. We are aligned with global standards and are rolling out ISO 45001:2018, which has replaced the OHSAS 18001:2007 series. All our operating mines are OHSAS 18001:2007 certified and are in the process of migration to ISO 45001:2018. Geita, Iduapriem, Siguiri, Cerro Vanguardia, Sunrise Dam and Tropicana mines have already achieved ISO 45001:2018 certification, with the remainder to follow during 2021. The certification process has been delayed due to COVID-19 travel restrictions.
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 Africa and Brazilian operations, albeit to a far lesser extent. AngloGold Ashanti provides occupational health services to its employees at its occupational health centres, clinics, and through outsourced service centres. The company continues to improve preventative occupational hygiene initiatives, such as implementing various control measures to prevent hazardous exposures, and providing employees with Personal Protective Equipment.
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, No. 78 of 1973 (ODMWA) and the Compensation for Occupational Injuries and Diseases Act, No. 130 of 1993 (COIDA). ODMWA provides for compensation to mineworkers and former mineworkers, who have work-related occupational diseases. COIDA provides for compensation in respect of job-related injuries and certain occupationally-related diseases contracted by mineworkers and former mineworkers. If the proposed combination and alignment 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. The recent sale of the company’s South African operating assets and liabilities did not include the silicosis or tuberculosis settlement obligations relating to South African employees, which were retained by AngloGold Ashanti. For further information, see “Item 18: Financial Statements—Note 1—Accounting Policies—Provision for silicosis”.
In addition to OLD, HIV and AIDS and associated diseases remain major health care challenges faced by AngloGold Ashanti’s Africa region operations. AngloGold Ashanti continues to implement programmes to help those infected with HIV and prevent new infections from spreading.
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. The Ghana Obuasi malaria control programme continues to roll-out indoor residual spraying programmes in 16 districts of Ghana in partnership with the Global Fund and the Ghana Department of Health.
In 2020, the COVID-19 pandemic took an unprecedented toll on businesses and socio-economic systems across the globe. This forced businesses to take extraordinary measures to protect the health of people, maintain operations and contribute to global control efforts. Similarly, the pandemic required significant focus and resources across AngloGold Ashanti as throughout the year we worked to limit the spread and maintain operations. Given the interdependence of employee and community health, measures to ensure the health of our employees and those in our communities remained our focus.
The emergence of COVID-19 however also assisted to better integrate broad health risk management beyond occupational health into the overall business strategy, to contribute to productivity as well as the social license to operate. We put various prevention and risk management protocols in place to address the potential risk of an epidemic or pandemic after our experience with Ebola in Guinea in 2014 and 2015 – our health team made sure that we were better prepared than many to address the situation.
This pandemic also highlighted other associated risks and emphasized the importance of optimising mental health, minimising non-communicable diseases associated with lifestyle as well as the need for systematic contribution to health system strengthening, local skill development and overall community development in the jurisdictions in which we operate. Such risks 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: 2020
Operations, projects and exploration programmes
|Cerro Vanguardia (92.5%)||Siguiri (85%)||Sunrise Dam|
|United States (exploration)|
Percentages indicate the ownership interest of AngloGold Ashanti. All operations are 100%-owned unless otherwise indicated.
(1) The joint arrangement, managed and operated by B2 Gold, is recognised as a joint operation in the financial statements.
(2) Sale completed on 10 November 2020.
(3) Sale completed on 31 December 2020.
(4) Obuasi's redevelopment project began in 2018.
(5) Kibali is managed and operated by the company's joint venture partner Barrick.
(6) Sale completed on 30 September 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.
In 2020, our portfolio of ten operations in eight countries, 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 Colombia and a focused global exploration programme, including exploration in the United States.
Our operations and projects are grouped into the following regions: Africa, Americas, Australia and South Africa (producing assets sold during 2020).
On 12 February 2020, the Company announced that it had reached an agreement with Harmony to sell all its remaining South African producing assets and related liabilities. The sale closed on 30 September 2020. On 10 November 2020, the Company announced that it had completed the sale of its interest in the Morila mine in Mali and on 30 December 2020, the Company announced that it had completed the sale of its interest in the Sadiola Mine in Mali.
AngloGold Ashanti’s operations and joint arrangements employed, on average, 36,952 people (including contractors) in 2020 (2019: 34,263).
Performance (including discontinued operations)
In 2020, AngloGold Ashanti produced attributable 3.0 million ounces (Moz) of gold (2019: 3.3Moz) as well as 3.6Moz of silver and 188 tonnes of sulphuric acid as by-products.
Production of 3.0 Moz of gold was achieved at a cost of sales of $3.0 billion and an all-in sustaining cost of $1,072/oz for subsidiaries and $810/oz for equity accounted joint venture operations compared to a production of 3.3Moz in 2019 at a cost of sales of $3.1 billion and all-in sustaining cost of $1,017/oz for subsidiaries and $767/oz for equity accounted joint venture operations.
The AngloGold Ashanti gold Ore Reserve reduced from 43.8Moz in December 2019 to 29.5Moz in December 2020. This gross annual decrease of 14.3Moz includes depletion of 3.4Moz, and disposal of assets in the South African region and Sadiola of 16.7Moz. This is offset partly by additions due to exploration and modelling changes of 4.5Moz, changes in economic assumptions of 1.0Moz and other factors of 0.3Moz. The Ore Reserve was estimated using the AngloGold Ashanti gold price of US$1,200/oz (2019: US$1,100/oz).
The AngloGold Ashanti copper Ore Reserve increased from 1.39Mt (3,068Mlb) in December 2019 to 1.41Mt (3,105Mlb) in December 2020. This gross annual increase of 0.02Mt due to optimisation of the production levels. The Ore Reserve was estimated at the AngloGold Ashanti copper price of US$2.65/lb (2019: US$2.65/lb).
Capital expenditure, including equity accounted joint ventures, in 2020 amounted to $792 million (2019: $814 million).
There were regrettably six fatalities across the group’s operations in 2020. The all injury frequency rate was 2.39 per million hours worked compared to 3.31 in 2019. Regrettably, there was one fatality at the Serra Grande mine in Brazil in a fall of ground incident in early 2021.
At year end, AngloGold Ashanti had five operations in the Africa region, four of which we manage and one of which is managed by Barrick. The Obuasi redevelopment project, which was commissioned in 2020, is on track to achieve steady-state production during 2021. The sale of Morila was completed on 10 November 2020 and the sale of Sadiola was completed on 30 December 2020.
|Attributable gold production|
|Average number of |
|Attr. Siguiri 85%||215||3,016|
|Joint venture operations|
|Democratic Republic of the Congo|
|Attr. Kibali 45%||364||2,333|
Africa Region - Key Statistics
|Gold production (attributable)||000oz||1,143||1,094||1,060|
|Cost of sales||$m||1,232||1,173||1,127|
Total cash costs (1)
All-in sustaining costs (1)
|Number of fatalities||2||0||0|
|AIFR||Per million hours worked||0.55||0.62||0.51|
|Average no of employees: Total||14,496||12,847||11,490|
(1) Includes Obuasi gold production in 2020, capitalised as part of the project development.
|Joint venture operations|
|Gold production (attributable)||000oz||364||445||452|
|Cost of sales||$m||340||428||480|
Total cash costs (1)
All-in sustaining costs (1)
Number of fatalities(2)
|Per million hours worked||n/a||0.65||0.29|
|Average no of employees: Total||2,333||2,939||3,343|
(1)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 Kibali which is managed by Barrick and not AngloGold Ashanti. For years prior to 2020, amounts are inclusive of amounts pertaining to Sadiola, which was sold in 2020.
Production and costs
Production from the Africa region subsidiaries increased from 1.094Moz in 2019 to 1,143Moz in 2020. The joint venture operations reported decreased production from 445Moz in 2019 compared to 364Moz in 2020, mainly due to the sale of the Sadiola and Morila joint ventures. Joint venture production in the Africa region in 2020 included record production at Geita, a marginal increase at Siguiri and a solid production performance at Iduapriem. The Kibali joint venture had a steady performance with a marginal decrease in production.
Geita’s production of 623,000oz was the highest annual production level achieved in the last 15 years and 3% higher than the preceding year’s 604,000oz. The increase was attributed to the greater volumes treated as the underground operations continued to ramp-up, providing finer fragmentation and higher grades to the mill. The processing plant benefited from higher run time, resulting in a 14% increase in underground tonnes mined for the year.
Iduapriem had a solid performance with gold production of 275,000oz maintaining the record production level of the previous year. This performance was primarily due to the 2% improvement in plant feed, supported by higher grades following implementation of the grade improvement project during 2020. Improved grades were partly offset by a 2% decline in tonnes treated due to challenges experienced in treating harder ore material. An additional tertiary ore crushing stage is being constructed to reduce the feed size to the milling circuit to deal with the increased rock hardness as deeper ore is extracted. In the second half of 2020, a decision was made to accelerate waste stripping at the Teberebie Cut 2 at the Block 7 and 8 pit, with some of the waste stripping planned for 2021 brought forward to the fourth quarter in 2020. As a result, mined volumes increased on the back of this investment, with the operation on track to accelerate ore delivery to the mill. Waste stripping here will continue into 2021. This strategic investment will assist the operation to reach the ore zone earlier, thus increasing confidence in planned gold production for 2021.
Siguiri increased production marginally in 2020 to 215,000oz compared with 213,000oz in 2019. Improvements in hardrock processing capability resulted in higher plant feed grade. Conversion of three leach tanks to carbon-in-leach and the Mill 1 discharge pump upgrade were successfully completed and commissioned on schedule. These will together help to improve overall plant recovery rates. Plant interventions and the effective use of plant run time increased throughput to 11.2Mt during the year. Progressive improvements were already delivered in the second half of the year, up 7% year-on-year over the six-month period.
Kibali had steady performance with production of 364,000oz (45% attributable), marginally lower than the 366,000oz produced in 2019. Record underground production was achieved in December 2020 and for the fourth quarter. Steady plant performance resulted in a 2% increase in plant throughput compared to 2019. This was partly offset by 2% decline in the recovered grade due to the impact of ore feed blend to the plant. The mine invested further in technology to will allow multiple, autonomous machines to operate on the same haulage and production levels, and to provide real-time visibility of all operations, including automated control of ventilation fans.
Cost of sales and all-in sustaining costs (AISC) for the subsidiary operations in the region increased to $1,232 million and $975/oz from $1,173 million and $947/oz in 2019, respectively, This increase was a result of higher underground mining costs at Geita due to the step-up in ore and waste volumes, offset by lower open pit mining cost following the completion of mining in Nyakanga Cut 8 by the end of September 2020; higher stay-in-business capital spend as a result of waste stripping at Teberebie Cut 2 at Iduapriem and additional Ore Reserve development at Geita and Obuasi; as well as higher royalty costs across the operations due to the increase in the average gold price received. Cost of sales for the joint venture operations decreased due exclusion of costs compared to 2019 due to the sale of Sadiola and Morila operations. AISC increased at Kibali during 2020.
The Operational Excellence programme continued during 2020. This programme is a group-wide efficiency-driven initiative focused on optimising mine plans and systems and on improving operational cost management. This translated into a review of asset potential and the further entrenchment of capital discipline. Various enhancement projects are tracked through a project management system as we strive to meaningfully move down the cost curve. Through this process, mine planning and forecasting improvement have been reflected in improved consistency in our reported cost performance.
Total capital spend for the region was $397m in 2020 compared to $410m in 2019. Capital investment was challenged by the global COVID-19 pandemic, resulting in delayed deliveries and a difficult execution environment. Growth capital of $168m was spent on the redevelopment of the Obuasi mine. Underground Ore Reserve development projects continued at Geita and pre-stripping began at Iduapriem for Teberebie Cut 2. These projects will provide access to orebodies identified for future gold extraction. The balance of the sustaining capital investment was used for capitalised exploration and stay-in-business projects to improve asset integrity and realise business improvements across the operations, to ensure safe and sustainable growth and production.
Regrettably, there were two fatalities in the Africa region in 2020. At Obuasi, in June 2020, an experienced equipment operator was hit by an underground load-haul dumper, while in July 2020 a security guard was hit and killed by a car driven by a private citizen, at the gate to one of Obuasi’s housing estates. Notwithstanding these setbacks, the region saw an improvement in AIFR from 0.62 per millions hours worked in 2019 to 0.55 in 2020.
The total attributable Africa Region Ore Reserve was 19.12 million ounces (2019: 17.93 million ounces). This amounts to 65 percent of the group’s Ore Reserve.
Growth and improvement
Siguiri’s combination plant project ramp-up progressed to achieve design throughput rates in the three-stage crushing plant and milling circuit. Recovery improved to 83.2% following completion of three additional CIL tank conversions and other supplementary projects. Commissioning of the fines screening plant planned for 2021 will increase the hard rock capacity of the crushing plant and improve the potential for high-grade hard rock optimisation. Furthermore, following approval of the Siguiri Block 2 feasibility study in 2020, execution is scheduled to begin in 2021.
At Geita, the focus on Ore Reserve development continued with 7,271m of development completed in 2020 compared to 4,130m in 2019. While this development provides access to the underground orebody, it also gives access to underground exploration platforms. Geita is progressing various underground projects which include ventilation, electrical supply, pumping and backfill projects to establish infrastructure for the underground operations at the Star & Comet and Nyankanga mining areas. The Geita Hill underground mining area and environmental permits were obtained and development of the access portal began in late 2020. The feasibility study For the Nyamalilima open pit project, located 2.4km from the Star & Comet underground operation, is in progress with execution planned for 2021. Furthermore, the mine initiated a national electric grid project for which the feasibility study and design are in progress for execution and connection in 2021/2022. The Grid connection planned will deliver a significantly reduced GHG emission footprint and a lower unit cost for power.
At Iduapriem, waste stripping for Teberebie Cut 2 was initiated and ore was mined from Teberebie Cut 1, Cut 3 and Ajopa. The mine is currently undergoing infrastructure development with the re-investment to take place from 2021 to 2023. Projects include
a waste-water treatment plant expansion, new TSF and return water dam. Permitting, land compensation and land access requirements run concurrently with the project and will continue as part of discussions with government, the authorities and relevant stakeholders. The mine is in the process of commissioning an additional tertiary ore crushing stage to reduce the ore feed size to the milling circuit to deal with the increased rock hardness as deeper ore is extracted. The brownfields exploration drilling campaign at the Teberebie and Ajopa pits continued in 2020.
At Kibali, the Ore Reserve depleted during 2020 was replaced for the second consecutive year, emphasising the success of the
exploration and Ore Reserve replacement strategy in place. The Megi-Marakeke-Sayi prefeasibility study was completed, delivering another viable open pit project that will improve the mine’s open cast and underground ore ratio and enhance mine plan flexibility. Drilling at Gorumbwa highlighted future underground potential. Ongoing conversion drilling at KCD underground continues to deliver additional Ore Reserve to extend the mine life. The mine is well placed to meet its 10-year production targets and to extend the production beyond this horizon.
The Obuasi redevelopment project continued during 2020, notwithstanding the challenges of COVID-19 which impacted completion of Phase 2 of the project. The project, which began in 2019, was set out in two phases. Phase 1 – Operational readiness – of the mine and plant redevelopment achieved output of 2,000 tonnes per day (tpd) of ore mined and milled. Phase 2 – the mine and plant infrastructure development – was to ramp up to 4,000tpd with commissioning underway by end December 2020.
The project made steady progress across several fronts. Commissioning of the phase 2 mills (4,000tpd capacity) began on
schedule, the Ore Reserve had increased by 22% at year-end and the metallurgical circuit was operating as planned. The mining
ramp-up was challenged by specialist-skills shortages due to COVID-19-related cases, quarantines and ongoing travel restrictions, particularly to and from Australia. Infrastructure development – the KRS ventilation shaft, the paste-fill plant and underground orehandling systems – is progressing to schedule, albeit with reduced flexibility due to similar constraints. Phase 1 achieved commercial production on 1 October 2020.
Operational Readiness continued in the fourth quarter of 2020 with capacity of 2,000tpd achieved. The project’s production for the full year ended 31 December 2020 was 127,000oz, with 30,000oz produced in the fourth quarter of the year. This included a 22-day planned stoppage in December for the tie-in of phase 2 of the project. Mining rates continued to be constrained by skilled labour challenges caused by Australian international travel restrictions during the year. These were again tightened in January 2021, with the quota of weekly travellers allowed to enter and exit the country’s airports being reduced further. This challenge is being resolved by a continued focus on in-country recruitment and training to help bridge the gap. As a result, the mine plan for 2020 was revised to take into account the COVID-19 limitations. This plan intends to achieve the required ramp-up in production
in parallel with the construction schedule and progress is being made in the second production area at Block 8-Lower.
Phase 2 construction was 90.1% complete as of 31 December 2020. Commissioning of the milling circuit began and continued in early 2021. Completion of the KRS shaft, paste-fill plant and the GCVS ventilation shaft are targeted for June 2021 when the ramp-up of phase 2 capacity to 4,000tpd (~1.7Mt annually) is planned to begin.
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 and exploration activities in the United States.
|Attributable gold production|
|Average number of |
|Cerro Vanguardia (Attr. 92.5%)||173||1,566|
Americas - Key Statistics
|Gold production (Attributable)||000oz||649||710||776|
|Cost of sales||$m||764||822||838|
Total cash costs (1)
All-in sustaining costs (1)
Capital expenditure (2)
|Number of fatalities||0||0||1|
|AIFR||Per million hours worked||3.68||3.50||3.97|
|Average no of employees: Total||8,789||8,114||7,973|
(1)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)100 percent, (not attributable) and includes Colombia.
Production and costs
Total production for the Americas region in 2020 declined to 649,000oz compared with 710,000oz in 2019, due to production declines at Serra Grande in Brazil and Cerro Vanguardia in Argentina.
At Cerro Vanguardia in Argentina, production of 173,000oz was 23% lower than 225,000oz the previous year. As this is a mature operation, this decline was largely due to the lower grades mined and reduced tonnages owing to the impact of the COVID-19 pandemic. Cerro Vanguardia had been performing well in terms of planned gold production using the available stockpile but unfortunately production was halted twice during the last quarter of the year – first a voluntary closure after the identification of positive COVID-19 cases at site in November, followed by a mandatory government-imposed lockdown in December.
In Brazil, production of 476,000oz was 2% lower than the previous year, mainly due to series of operational issues that were compounded by COVID-related restrictions. Production had improved by year end with production in the second half of the up
by 7% as a result of an increase in tonnes of ore mined.
At AGA Mineração, full year production was 362,000oz, in line with 2019 despite the impact of stoppages and absenteeism due to COVID -19, unexpected and heavier-than-normal rains in the first half of the year, and geotechnical issues on the high-grade programmed stope. The Cuiabá complex’s production declined 7% lower than in 2019 due to geological modelling which reduced the thickness of the orebody at the lower levels of the mine.
At the Córrego do Sítio (CdS) complex, production increased by 22% to 101,000oz compared with 2019. This increase was due to the higher tonnages and grades placed onto the heap leach and the higher tonnage treated in the sulphide circuit. This improvement resulted from the strategy in place at CdS Mine 1 to increase development and production. Following consolidation
of the São Bento operation (CdS II), plant capacity increased and implementation of the improvement project to improve reliability of the sulphide plant was completed.
At Serra Grande, production declined 7% to 114,000oz, mainly resulting from lower grades due to geological model changes, grade control changes and operational delays at high grade stope areas, further impacted by absenteeism due to the COVID-19 pandemic.
Cost of sales in the Americas region decreased by 8% from $822m in 2019 to $764m in 2020. The region’s all-in-sustaining cost of $1,003/oz for 2020 was 3% lower than $1,032/oz in 2019, a consequence mainly of depreciation against the dollar in both the Brazilian and Argentinian currencies, changes in rehabilitation provisions (economic parameters) and, in Argentina, a higher silver by-product price that was partially offset by lower gold production and inflationary
Total cash costs were down 2% for the region. In Brazil the decrease in total cash costs reflect the weaker exchange rate of the Brazilian real against the US dollar and the increase in stockpile inventories, coming in lower year-on-year despite lower gold
production and higher operational costs related to spare parts, rental equipment and mine contractors.
At Cerro Vanguardia in Argentina, total cash costs were 4% higher year-on-year, mainly as a result of increased inflation mainly relating to increments in salaries. Unfavourable stockpile movements due to lower tonnes mined and treated and higher royalties on the back of the higher average gold price received also contributed to increased costs. These were partially offset by higher efficiencies derived from reduced consumption of energy, maintenance services and spare parts.
Regional capital expenditure of $217m was 11% higher than the previous year and was mainly on Ore Reserve development, exploration, enhanced TSF management and maintenance, mainly for the Brazilian operations. This expenditure included $49m for the Colombian projects, mainly in relation to the MCQ land capitalisation and completion of the technical feasibility studies and the bridging engineering phase, as well as the Gramalote drilling programme and activities to do with the completion of the feasibility studies.
The Brazilian operations maintained focus on Ore Reserve and Mineral Resource conversion to improve confidence levels, while
work is underway to convert the TSFs to dry stacking.
At Cerro Vanguardia, in Argentina, COVID-related stoppages resulted in reduced Ore Reserve development as fewer metres were developed. Capital expenditure for the year was spent mostly on the replacement of mine equipment. During 2020, the mine continued with its strategy to purchase larger trucks to increase hauling and loading capacity to further improve productivity and haulage volumes. Fleet renewal will continue in 2021.
The outlook for growth capital expenditure outflows for the region until 2024 relate mainly to the Gramalote and Quebradona projects in Colombia. Quebradona will enable the group to diversify into copper production at an attractive estimated copper all-in
sustaining cost margin of between 60% to 70%. Some increase in the capital outlay is also expected between 2021 to 2022 at AGA Mineração in respect of Ore Reserve development and exploration to increase orebody confidence and ongoing TSF conversion to dry-stacking. According to current estimates, capital expenditures in 2021 required to implement this conversion to dry stacking will be in excess of $70 million.
There were no fatalities in the Americas region in 2020. Safety regressed overall with an increase in AIFR of 3.50 in 2019 to 3.68 in 2020. Regrettably, there was one fatality at the Serra Grande mine in Brazil in a fall of ground incident in early 2021.
At the end of 2020, the total attributable Ore Reserve for the Americas region was 7.52 million ounces (2019: 7.2 million ounces). This is approximately 25 percent of the group’s total Ore Reserve.
Growth and improvement
In Brazil, plans to increase gold production are underway. Productivity is expected to improve as a result of the Operational Excellence initiatives that are underway. The strategy to enhance mining flexibility through focused development, that began delivering results in 2019, continued in 2020 and is key for the upcoming year.
Despite a drop in production, the Cuiabá complex achieved a record 19,357m of development in the year, an increase of 17% from 2019 (16,563m), together with the processing of record volumes at the plant, 1.905Mt in 2020 versus 1.799Mt in 2019. These results are outcomes of an Operational Excellence strategy conducted in 2020. As part of the long-term growth strategy, the potential for new orebodies is being investigated in regional targets, along with plans for the deepening of the Cuiabá mine and the building of orebody knowledge at depth and related modelling of geological behaviour.
At Córrego do Sítio (CdS), the focus remains in advancing the exploration drilling campaign to enable reserve addition to support mine flexibility and support a future expansion. In the long term, replacement of the Lamego Ore Reserve will provide expansion opportunities at the CdS complex. In the short-to-medium term, exploration, evaluation and implementation of additional production sources are expected at both Cuiabá and CdS II.
At Serra Grande, exploration and Ore Reserve development will create options to further scale-up production, extend the life of mine and sustain higher margins. Exploration and Ore Reserve development will create options to increase production, extend mine life and improve margins. An exploration drill campaign has successfully confirmed the down-plunge continuity of the underground mines. In addition, the discovery of other new orebodies, including Palmeiras Sul, has consistently grown the Mineral Resource. There is also opportunity for unlocking the open pit potential in the greenstone belt.
At Cerro Vanguardia, exploration during 2020 continued searching for new viable orebodies to extend the mine life. This included
successful channel sampling and diamond drilling. A total of 25,073m was drilled as part of a long-term programme to pursue the extension of mineralisation along and down-dip of some of the more important veins in the central zone of the district. The drilling
programme also targeted minor secondary veins and tested new targets several kilometres away from the main zone. Plans for 2021 include further diamond drilling to find new exploration targets and determine a new Inferred Mineral Resource as well as to convert the existing Inferred Mineral Resource into Ore Reserve, as well as additional trenching, channel sampling and ground magnetics surveys.
The Quebradona and Gramalote projects are expected to complete feasibility studies and be presented to the board for approval in the second half in 2021. Once approved, construction at Gramalote is expected to take about three years with production expected to start in 2024. At Quebradona, construction is anticipated to take approximately four years, starting first with the underground access tunnel development, followed by orebody development and process plant construction.
In Brazil, starting from the second quarter of 2020, the Brazilian operations reviewed their portfolio to include new initiatives to create value in line with the Operational Excellence programme. Initiatives included operational and administrative efficiency gains across all sites and regional office. Increasing mine flexibility was a key focus in 2020. Operations set new records for development and processing, which helped offset negative impacts of geological model changes and other operational challenges faced throughout the year, including COVID-19.
In Argentina, the Operational Excellence initiatives related to different areas were implemented during 2020. The most significant savings resulted from the renegotiation of the natural gas contract.
|Attributable gold production|
|Average number of |
|1. Sunrise Dam||256||622|
|2. Tropicana 70%||298||608|
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||554||614||625|
|Cost of sales||$m||705||632||622|
Total cash costs (1)
All-in sustaining costs (1)
|Number of fatalities||0||0||0|
|AIFR||Per million hours worked||3.74||7.33||9.14|
|Average no of employees: Total||1,230||1,140||1,051|
(1)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 Australia region produced 554,000oz in 2020 compared to 614,000oz in 2019, as the completion of grade streaming and a lower proportion of open pit ore in the mill feed resulted in a 17% drop in year-on-year attributable production at Tropicana, in line with the mine plan.
At Sunrise Dam production was steady at 256,000oz as the mine focused on a strategy to fill the mill with the best quality ore through a programme of underground exploration and development to build orebody knowledge and add to the Ore Reserve. The strategy involves maximizing the extraction of the Vogue orebody, which is currently the primary source of underground ore, and providing mining flexibility by developing an alternate mining area. Vogue will contribute 80% of underground ore over the next two years, with multiple ore sources making up the remaining 20% of mill feed. Mill throughput remained consistent at 4.1Mt for 2020 and metallurgical recovery is benefiting from the float ultra-fine grind circuit that was implemented in 2018.
Pre-stripping of the Golden Delicious open pit, 12km from the Sunrise Dam processing plant, began in the December quarter 2020. Ore production from Golden Delicious is scheduled to begin in the June quarter of 2021 and the open pit is expected to deliver approximately 136,000oz over a 2.7-year life of mine. From the second half of 2021, Golden Delicious ore will totally displace the low-grade stockpile mill feed, enabling grade streaming to be applied through 2022.
Tropicana produced 298,000oz (attributable) for the year compared to 360,000oz in 2019. Production was lower year-on-year as planned. Up until June 2020, ore production from the open pits exceeded plant capacity, allowing higher-grade ore to be preferentially treated, while lower-grade ore was accumulated on stockpiles. With the completion of the Tropicana pit and stage one of the Havana pit (Havana cutbacks 1, 2 and 3) mid-way through the year, this grade streaming process ceased, in line with the mine plan.
The Boston Shaker underground mine started commercial production on time and on budget in September 2020. When the underground mine reaches its full production rate of 1.1 Mtpa in the second half of 2021, it will contribute 100,000oz annually to gold production. The mine will achieve payback in three years. Waste stripping for stage 2 of the Havana pit began in the second
half of 2020 and while waste stripping is underway, mill feed will be made up of ore from the Boston Shaker underground mine, the Boston Shaker open pit and stockpiles.
The Tropicana processing plant continued to perform well in 2020, with throughput and metallurgical recoveries higher than the previous year. Further efficiency improvements are planned for 2021 to increase throughput from 8.8Mtpa to 9Mtpa in the second half.
Cost of sales in the Australia region increased from $632m in 2019 to $705m in 2020. The region’s all-in sustaining cost was $1,225/oz in 2020 compared to $990/oz in 2019. This was largely due to a 41% increase in all-in sustaining cost at Tropicana
where lower production and unfavourable inventory movement had a negative impact. The all-in sustaining cost at Sunrise Dam increased by 6% due mainly to costs related to a higher volume of ore purchases from external sources (298,000t compared to 71,000t in 2019) in 2020. Costs were also impacted by additional unbudgeted COVID-19 expenditure.
The region’s capital expenditure of $142.6 million in 2020 remained in line with 2019 capital expenditure of $149.2 million. A total of $89.5 million was spent at Tropicana including $25.3 million of growth capital to complete the Boston Shaker underground project on time and on budget. Deferred waste and capitalised prestripping, representing 52% of the total in 2020, remains the focus at Tropicana.
At Sunrise Dam a total of $52.8 million was spent during 2020, which includes $3 million spent on the commencement of the Golden Delicious growth project. Golden Delicious will reach commercial production in the third quarter of 2021. Ore Reserve development capital expenditure at 42% of the total in 2020 remains the focus at Sunrise Dam to unlock future gold production.
There were no fatalities in the Australia region in 2020, continuing a positive safety trend since the commissioning of Tropicana in 2013. The site ended the year with the AIFR for the region dropping to 3.74. The regional LTIFR for 2020 was 0.79. Notably Tropicana has had three restricted work case injuries for two years and no lost time injuries for three years.
At the end of 2020, the total attributable Ore Reserve for the Australia region was 3.04 million ounces (2019: 3.2 million ounces). This is approximately 10 percent of the group’s total Ore Reserve.
Growth and improvement
At Sunrise Dam the substantial underground diamond-drilling programme that began in 2019 is generating encouraging results, discovering the Frankie orebody during 2020 and extending the Vogue and Carey Shear ore zones. Multiple ore zones remain open along strike and at depth.
Two major steep lodes have been defined at Frankie spanning in strike length and 400m in height. Frankie is close to existing underground infrastructure and based on results to date this area has the potential to deliver approximately 500,000t of ore per annum over a five-year period from 2023. A dedicated diamond drilling platform was established in early 2021 to better drill out this zone, and three diamond drill rigs were drilling from existing drives for strike extensions to the north and south.
Regional exploration continues to seek additional satellite ore sources within trucking distance of the Sunrise Dam processing plant. The aim is to deliver annual ore production of 3 Mtpa to displace lower grade surface stockpiles.
The company holds 880 square kilometres of tenements in this highly prospective district, some in the Butcher Well joint venture with Northern Star and some in its own right. Drilling will continue in 2021.
There is significant potential to unlock known extensions of mineralisation beneath the Tropicana and Havana open pits as well as extensions at depth in the Boston Shaker underground.
A study to look at the trade-off between mining deeper Havana mineralisation via a third cutback or by underground methods was initiated in 2020. This study will be completed in the first half of 2021.
Development of a 500m underground drill drive from the Boston Shaker decline to test beneath the Tropicana open pit was completed in 2020 and diamond drilling was underway early in 2021. The drill drive is well-positioned to provide production access to Tropicana underground mineralisation, should an Ore Reserve be defined. This drive could also be extended to cost-effectively explore the mineralised system beneath the open pits to the south and ultimately access the Havana underground mineralisation in the future.
Near-mine exploration continues to focus on understanding the geology to the north and south of Tropicana, seeking strike extensions and offsets to the Tropicana orebody.
Satellite open pit opportunities are being assessed along the mineralised corridor to the north of the mine at Springbok and Angel Eyes, to the south at Rusty Nail and further south at Madras and New Zebra.
The sale of the South African assets to Harmony closed on 30 September 2020. As a result, the figures in this section relate
to the nine months ended on 30 September 2020, unless the context indicates otherwise.
The discontinued operations in the South Africa region are:
West Wits: Mponeng
|Average number of |
1. West Wits
2. Surface operations (1)
(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)
|Cost of sales||$m||287||479||590|
Total cash costs (2)
All-in sustaining costs (2)
|Number of fatalities||4||0||2|
|AIFR||Per million hours worked||6.12||10.00||10.25|
|Average no of employees: Total||7,294||6,975||17,308|
(1)Refers to underground operations only.
(2)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’s operations produced 241,000oz at a total cash cost of $1,149/oz for the nine months to September 2020 compared to 307,000oz produced at a total cash cost of $1,003/oz for the same nine-month period in 2019. The decline in annual production was mainly due to the slow start to the year, a result of poor ground conditions; safety stoppages owing to seismic events and related fatalities; and the national COVID-related lockdown implemented at the end of March 2020.
Cost of sales in the South Africa region decreased from $479m in 2019 to $287m in 2020. All-in-sustaining cost for the South Africa region for 2020 was $1,296/oz, versus $1,156/oz the prior year, with the increase due to lower gold production, higher royalties, inflationary cost increases for power, labour and consumables, higher hauling contractor costs and IT-related expenditure at surface operations. This was partially offset by favourable by-product contributions,
lower sustaining capital expenditure, and the weaker rand against the dollar.
Total capital spend in South Africa was $35m for the nine months ending September 2020 compared to $57m for the 2019 year.
Regrettably there were four fatalities in the South Africa region in 2020, which occurred at Mponeng mine, three resulting from a seismic fall of ground related incident and one a rail bound equipment related incident. The AIFR was 6.12 for the year, an improvement year-on-year.
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.
During 2020, generative exploration activities were undertaken in Australia, Brazil and the USA. In all, 80,541m of drilling were completed globally with total expenditure of $31.2m over the year.
Laverton District – AGA (100%) and Butcher Well and Lake Carey JV (70%)
Aircore (AC), reverse circulation (RC) and diamond drilling (DD) was completed in the Laverton District, with a total of 64,041m drilled in 2020. At the Bismarck prospect (70% AngloGold Ashanti), six DD holes were completed for 1,128m. The drilling intersected predominantly basaltic-andesite volcanic rocks with gold mineralisation hosted in narrow sulphidic breccias and associated stockwork quartz veins. At the Turing prospect (100% AngloGold Ashanti), 244 AC holes for 10,949m, 11 RC holes for 1,546m and 4 DD holes for 1,127m were completed. The AC drilling defined a greater than 2km long, NNW-trending zone of anomalous gold, which remains open along strike. Follow-up RC and DD returned mostly low-tenor gold intercepts, apart from isolated high-grade results associated with coarse visible gold in narrow quartz veins. At the Cleveland prospect (100% AngloGold Ashanti), 123 AC holes for 9,728m and 13 DD holes for 2,494m were completed. Several anomalous gold intercepts were received from AC drilling with results open from the southernmost drill line. The DD was designed to extend RC holes and test for down-plunge extensions to a 500m long, NNW-trending zone of gold mineralisation identified in the first half of 2020. Most of the DD holes intersected intervals of pyrite-chalcopyrite mineralisation within quartz-sericitepyrophyllite- chloritoid schist. AC drilling was also completed at the Vampire (1,393m), Pioneer (1,239m), Seguin (558m), Triton (11,844m), Argonaut (1,011m), Juno (17,790m) and Kraken (3,144m) prospects.
North Queensland (100% AngloGold Ashanti)
Field programmes consisting of mapping and soil sampling continue to be postponed due to travel restrictions related to the COVID-19 pandemic.
Silicon (100% AngloGold Ashanti)
At Silicon, the Plan of Operations was approved during the third quarter of 2020, and earthworks started for the construction of pads and roads throughout the central Silicon project area. One RC hole was completed (360m) before drilling was stopped. Drilling was restarted in October, with a total of 9,728m of combined diamond and RC drilling completed during the second half in 2020. Core drilling also began at the Merlin target in the southern Silicon project area during the period. The final $2.4m payment of the Silicon Option Earn-in Agreement was paid to acquire 100% ownership of the Silicon project.
Rhyolite – AngloGold Ashanti (100% AngloGold Ashanti)
In the first half of the year, RC drilling for 2,423m was completed with no significant results received. Additional prospecting work was carried out at Rhyolite in second half of the year.
Transvaal – AngloGold Ashanti (100% AngloGold Ashanti)
At Transvaal, drill target delineation was completed during the period based on detailed geological mapping and surface rock chip geochemical sampling from first half of 2020. IP lines were completed in the target area to refine drill targets developed in the fort half of 2020. A Notice of Intent permit was submitted and received for drill pad and access construction for the first targets.
In Brazil, additional exploration licenses were granted at the WBC project.
In Argentina and West Africa, exploration focused on target generation activities.
During 2020, brownfields exploration activities were undertaken across the globe. Brownfields exploration completed 1,409km of drilling with a total expenditure of $63.1m (capital) and $67.7m (expensed) for the year.
Capitalised (underground) and expensed (surface/underground) drilling programmes completed a total of 117,938m during the year at a cost of $27.2m.
Mineral Resource development drilling continued at the Nyamulilima deposit. Results confirmed the continuity of the ore zones within the eastern and western mineralised domains and increased the Mineral Resource confidence within the optimised pit shells and allowed for the declaration of a maiden Ore Reserve. Results from the Mineral Resource development drilling at Nyankanga Block3, Star & Comet Cut 3 and at Cut 2 confirmed the Mineral Resource model interpretations.
Sterilisation drilling for the waste dump was carried out and show no significant intersections.
Mineral Resource definition drilling was carried out at Nyankanga Block 1, returning results that confirmed the down-dip continuity of mineralisation at Block 1.
Reconnaissance drilling programmes into the footwall of the Nyankanga underground project returned low grade, erratic mineralisation hosted within these deep-seated structures. Reconnaissance drilling carried out at Star & Comet Cut 2 returned
results that confirmed the presence of the footwall structure.
Capitalised and expensed drilling programmes completed a total of 85,119m during the year at a total cost of $10.9m.
At Block 1 infill drilling occurred at the Kami Saddle, Sintroko West, Sanu Tinti, Sokunu, Bidini, Bidini-Tubani-Kalamagna pushback, Sofore-Tubani, Bidini North, Kami and Seguelen PB2.
Reconnaissance drilling occurred at Kami North, Kami West and South, Solakoro North, Seguelen, the Carbonate Hills, Komatiguiya South East, Seguelen PB2, Sorofe-Tubani, Kossise and Balato NW. In Block 2, Saraya infill drilling occurred and sterilisation drilling was carried out at Foulata. At Saraya West E.L. and Foulata reconnaissance drilling was completed.
Assays results were received for Sokunu northwest infill drilling, Sintroko West reconnaissance drilling, Sintroko West infill drilling and Komatiguiya southeast reconnaissance drilling.
Mapping focused on improving the understanding of the geology of the Bidini, Sanu Tinti, Kalamagna, Kami and Tubani pits. field works was also conducted at Doko, Didid, Kossisem Kozan and Sokunu and there were encouraging observations.
Geometallurgical proxy data collection and interpretation were performed, and samples have been analysed respectively for pXRF, Terraspec and Equotip. At Saraya, metallurgical DD deeper hole drilling was completed, aimed at understanding Western intrusion.
At Iduapriem, drilling totalled 47,164m at a cost of $6.4m.
During the year, exploration drilling principally focussed on Block 1 East and West, Efuanta, Badukrom and the Block 5 xtension projects.
The Block 1 exploration project involved mapping and Mineral Resource conversion drilling at Block 1 Central, Block 1 East and Block 1 West. Significant intersections were reported for Block 1 East.
At Efuanta, drilling was wrapped up with significant intersections reported. While at Badukrom, drilling commenced in the fourth quarter of 2020 and reported significant intersections.
One hole was drilled at Block 3 West to ascertain the weathering profile down dip of the pit as part of the return water dam feasibility studies.
Block 5 extension drilling via RC and DD returned significant intersections. Sampling of the Mile 8 auger drilling project was completed, and results have been received and narrowed down the anomalous targets. Outcrop mapping was carried out at Block 1 East and an 8m thick conglomerate outcrop was observed at ML6J.
At Obuasi, drilling continued with a total of 55,094m drilled in the underground exploration programmes at a cost of $6.5m.
Exploration and infill drilling activities continued on 41 level in Block 10, and in stockpiles 12, 13 and 14 along the ODD 32 level in Block 8.
Grade control drilling continued in Block 8, 27 and 29 Level, Sansu 18 Level and 26 Level and 28 KRS in Block 10. Results from 41 Level north and south drilling confirmed the Mineral Resource models.
Results from the reconnaissance drilling from stockpiles 12, 13 and 14 along the ODD showed continuity in grade and structure within the Obuasi fissure.
Grade control drilling results at 27 L 312, at 28 L KRS 295 and at 26 L in Sansu 3 shows continuity of the Obuasi fissure but variability in width.
Democratic Republic of the Congo
Capitalised and Expensed drilling programmes completed a total of 17.845m during the year at a cost of $3.6m. The focus of exploration was on Mineral Resource replacement/addition and underground projects.
Drilling at KCD is in progress, with additional deep holes planned as the initial deep hole results were not encouraging, possibly clipping the edge of the payshoots.
Results returned from the Ikamva East and Kombokolo confirm the models. Two identified targets are to be tested with proposed
drilling in the first quarter of 2021 at Ikamva area.
At Madungu, the target shows some upside with possible plunge extent to the mineralisation and further holes are planned. At Oere, overall results from both drilling and trenching programmes support the current model.
While for the Kibali region, the KZ geological map was updated and four main sets of structures were highlighted and identified that infill soil sampling is required. At KZ South, field activities were completed and identified 6 sub-targets interpreted to potentially host higher grade mineralisation.
In Argentina, a total of 25,075m of drilling was completed at a cost of $4.4m.
A total of 0.93km of channels were carried out on the Carmela, Dora, Teresa and Gabriela veins in the southern and central parts of the tenements Drilling was carried out to test downdip extension of vein mineralisation at the Northern zone (Cuncuna, Vanguardia 1, Vanguardia 2, Vanguardia 3 veins), Central zone (Atila, Gesica, Loma del Muerto veins) and Southern zone (Carmela, El Lazo, Teresa veins).
Drilling was also carried out to test the extension of mineralisation in less well-defined veins outside the main district at Dora, El Trío, Oveja and Trinidad.
In Brazil, at Cuiabá and Lamego a total 89,251m was drilled at a cost of $9.6m.
At Cuiabá, Mineral Resource Conversion drilling on Levels 20 and 21 was completed at the beginning of the fourth quarter of 2020. The L20 FGS/SER (main orebodies) drilling campaign continues, and excellent results reported. A directional drilling programme started in March and focused on Fonte Grande South.
The intensive drilling/ mapping campaign within the quartz-vein satellite orebodies was completed and the model has been updated. Several significant intercepts were also reported.
Drilling at secondary orebodies: Viana, Serrotinho and Galinheiro extensions (levels 04 and 05) returned good results confirming theorebodies potential to create mining flexibility at shallower levels.
In the regional programmes, at Descoberto a 2nd drill rig commenced drilling and good results continue to be reported. At Tinguá various exploration activities progressed well including mapping, soil sampling, and resulted in positive outcomes. The historical surface galleries surrounding or associated with Cuiabá Mine were scanned. At Matarelli, a geochemical soil survey was conducted, and the first results showed local gold anomalies.
At the Lamego Sul Target the soil sample campaign was completed and the soil survey to cover most of the region started. At Lamego, underground and surface drilling continued. Results from exploratory drilling campaign from Queimada orebodies level 5 confirmed potential in lower levels of the mine and show strike extension potential. Surface drilling returned positive gold results for AVOX (oxide programme). The Arco da Velha sulphide drilling campaign is currently on hold due to landlord issues.
At Córrego do Sítio (CdS), capitalised and expensed drilling programmes completed a total of 154,709m at a cost of $10.1m
during the year.
At CdS I, underground drilling focused on Cachorro Bravo, Laranjeiras and Carvoaria with positive results from all targets. Surface drilling was carried out at Rosalino, Campinas and Mutuca and retuned positive results.
CdS II drilling was carried out at São Bento, Sangue de Boi and Pinta Bem Sul with positive results. Results are still pending for Pinta Bem Sul.
CdS III drilling continued at Jambeiro target and Anomalia as well as sterilisation drilling for the CdS III mining project. Most results are pending.
At Serra Grande, capitalised and expensed drilling programmes completed a total of 117,057m at a cost of $7.8m.
Drilling focused on completing the drilling programme at Ingá, Forquilha, Mangaba-Corpo IV, Angicão (D Tereza), Mangaba, Palmeiras South Mine, Superior Zone (Mine III), VQZ (deep mine) and Pequizão.
The Mineral Resource evaluation process has been finished with Ore Reserve additions of 343koz.
In Colombia, at La Colosa, no exploration occurred.
At the Quebradona project, drilling to cover the vent shafts and the planned ore passes was completed, and all results have been reported. Grade control schedule activities were reviewed for the Quebradona Advanced Geology project. Operational Readiness final adjustments and FS chapters are expected to include the summary of these activities up the end of January 2021. The 2020 geotechnical drilling programme for infrastructure sites has been concluded. The geotechnical soils testing programme and rock test work is currently in progress.
Exploration field reconnaissance, grab sampling and mapping was performed.
At Sunrise Dam capitalised and expensed drilling programmes completed a total of 214,294m at a cost of $30.6m during the year.
Eleven underground rigs were used during the period, for infill, and reconnaissance drilling at Frankie, Frankie Extensions, Carey Shear, Porphyry Steeps, Cosmo East, MWS Steeps, Hammerhead South, Vogue South, Vogue East, Vogue Deeps, Elle, Western Ramps and Flamingo.
Exploration/reconnaissance drilling was conducted at Stella and Western Ramps. Regional surface exploration targeted Orchard,
Pink Lady, Sunrise North and Golden Delicious Significant intercepts were reported for Vogue, Frankie, Carey, Hammerhead South, Elle, Cosmo East, Western ramps and Porphyry Steeps.
At Tropicana, drilling completed 127,468m at a cost of $10.2m.
Mine Mineral Resource development drilling comprised of in-pit Mineral Resource Confidence drilling at BS03; Mineral Resource
confidence drilling at Crouching Tiger as part of the TSF options study; Indicated drilling at Madras and Measured underground
diamond drilling at Tropicana underground.
Regional exploration AC drilling was carried out at Paradise, Madras, New Zebra, Husky, Sanpan, Phoenix North, Bushwacker and Snowball. RC and diamond drilling were completed at Madras/Masala, Springbok, Highball, Hat Trick, Phoenix, Voodoo Child, Wild Thing, Angel Eyes and Sazerac. The best assay results were returned from Tropicana underground and the Sazerac regional target.
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 4.2Moz to the gold Ore Reserve. Quebradona also has a copper Ore Reserve of 3,105Mlbs. 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 (50%) and B2Gold (50%), is located near the towns of Providencia and San Jose del Nus within the municipality of San Roque, in the northwest of the Department of Antioquia. It is approximately 124km northeast of Medellín, the regional capital of the Antioquia Department. B2Gold became the project manager and operator from 2020.
Work on the feasibility study continued as planned in 2020 with drilling resuming in May 2020. An updated resource model completed by year end provided the information necessary to advance pit design and mining engineering studies. Feasibility stage metallurgical studies and process plant designs were also completed. Infrastructure design work continues. The results of the feasibility study are expected in the second quarter of 2021 which will be submitted for board approval. The decision on whether to proceed with development is expected shortly thereafter.
In December 2020, the Gramalote project received the “Sello Social de La Minería en Antioquia”, which is presented through the Ministry of Mines of Antioquia to large scale operations, recognising Gramalote for its commitment to community support.
The Quebradona deposit is situated in the Middle Cáuca region of Colombia, in the Department of Antioquia, 60km southwest
of Medellín within the Municipality of Jericó.. The project is 100% owned and managed by AngloGold Ashanti.
The feasibility study currently underway to determine the engineering activities is due to be completed early in 2021. During the second half of 2020, much of the focus was on responding to requests for additional information as part of the application process for the necessary mining and environmental licenses and related permits. Following completion of the feasibility study, the project will be submitted for board approval in the second quarter of 2021, following which will be the receipt of the environmental and mining licences to operate. The project is expected to treat 6.2Mt annually to produce 3 billion pounds of copper, 1.5Moz of gold and 21Moz of Silver over a potential 23-year life. First production is expected to start in the second half of 2025. Quebradona will be a copper mine with gold and silver as by-products. Simultaneously, work continued on incorporating all findings from peer reviews and promoting the ‘#Miningwithpurpose’ campaign, which seeks to highlight the integration of social, environmental and economic imperatives into the project and subsequent mining operations. Local stakeholder support from the Jericó community tends to be stable with the most recent survey conducted indicating that 68% of residents support the project.
The La Colosa project is located approximately 150km west of Bogotá 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 and managed by AngloGold Ashanti and, it was halted and has been voluntarily suspended, since 2017, due to force majeure recognised by the national mining authority, relating to environmental permits required to continue the project’s mining exploration activities.
4C. ORGANISATIONAL STRUCTURE
AngloGold Ashanti’s operations are divided into the following regions:
•South Africa – West Wits and surface operations (sold on 30 September 2020);
•Africa – operations in Ghana, Guinea and Tanzania and joint venture operations in the DRC and Mali (the Morila and Sadiola Mines in Mali were sold during 2020);
•Australia – operations in Australia; and
•Americas – operations in Argentina and Brazil, and exploration projects in Colombia and the United States.
The above four regions also correspond to AngloGold Ashanti’s four business segments. The South Africa region is recognised for financial statement purposes as a discontinued operation.
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 List of AngloGold Ashanti Limited subsidiaries at 31 December 2020” 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 five mining operations within the Africa region. Mining is from both open pit and underground, with Obuasi (in Ghana) being an underground mine in a redevelopment phase, Iduapriem (in Ghana) and Siguiri (in Guinea) being open pit mines, and Kibali (in DRC) and Geita (in Tanzania) being a combination of open pit and underground mines. The Morila and Sadiola Mines were sold during 2020. The sale of the company’s interests in the Yatela mine (in Mali) to the Government of Mali, announced in 2019, is pending fulfilment or waiver of a number of conditions precedent.
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 between AngloGold Ashanti (45 percent), Barrick Gold Corporation (45 percent) and Société Minière de Kilo-Moto (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. The underground mine has both a ramp and shaft system, with the shaft reaching a depth of 740 metres. Development of the underground mine commenced in 2013, with the first underground development ore mined in 2013 and stoping commencing 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 now being used to haul ore from some of the shallower zones and to supplement shaft haulage. Kibali has a processing plant capable of producing an average of 800koz of gold per annum by treating 7.5Mtpa. 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, Ajopa South and Teberebie mining leases on a 139.67km2 concession. The renewal of all four mining leases has been obtained and these leases are valid until February 2035.
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, the AngloGold Ashanti board approved a redevelopment project to establish Obuasi as a modern, efficient, mechanised, underground operation. The project 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 per day of ore, was completed as of 1 October 2020. The impact of COVID-19 caused some construction delays and continues to have a knock-on effect on Phase 2 of the project. Phase 2 construction was near complete as of December 2020. In the first half of 2021, Phase 2 will ramp up plant capacity to 4,000t per day of ore or 1.4Mtpa. Phase 1 and 2 works also consisted of underground development, hoisting shafts and associated infrastructure, power and water reticulation, workshops and company housing estates. Power is supplied to the mine by the VRA and GRIDCo, although the company has completed additional emergency power generation capacity as part of Phase 1 and 2 construction works. In mid-2021, Phase 3 project works will move forward, concentrating on underground and surface underground infrastructure such as fans materials handling systems as part of ongoing capital works.
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 southwestern 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 southwest of the Malian capital Bamako, near the Malian border.
Siguiri is currently a multi-pit fresh rock and oxide gold mining operation, operated by a contract miner. Processing of the ore is done by a hybrid carbon-in-leach (CIL) circuit processing plant converted from carbon-in-pulp (CIP) in 2018. The plant is capable of treating 50% hard ore post the commissioning a new ball mill and 3 stage crushing plant in the first quarter of 2019. Power for the mine is self-generated.
Siguiri is mined under licence from the government of Guinea. The Mineral Resource and Ore Reserve are covered by SAG mining concession D/97/171/PRG/SGG, totalling 1,494.5km2. The original SAG concession was granted under the Convention de Base between the République de Guinée and SAG signed on 4 August 1997. The concession is to be explored and mined exclusively for gold, silver and diamonds by SAG for 25 years from the date of the agreement, until 4 August 2022. An updated concession was negotiated with the government in 2016. The Convention de Base will guide the renewal of the mining concession in 2022. The SAG concession was granted under a new amended Convention de Base between the République de Guinée and SAG signed on 28 June 2016 and ratified by the Guinean parliament on 13 December 2016. The Convention de Base was ratified by the constitutional court and published in the Journal Officiel of the Republic of Guinea on 24 January 2017. Dependent on the submission of the necessary renewal documentation on, or before, 4 March 2022, the concession is to be explored and mined exclusively for gold, silver and diamonds by SAG for 25 years from the date of agreement to 13 December 2041.
The concession is dominated by Proterozoic Birimian rocks which consist of turbidite facies sedimentary sequences. The two main types of gold deposits which occur in the Siguiri basin and are mined are:
•laterite mineralisation (CAP) which occurs as surficial aprons of colluvium or as palaeo‑channels of alluvial lateritic gravel adjacent to, and immediately above in-situ deposits; and
•in-situ quartz-vein related mineralisation hosted in meta-sediments with the better mineralisation associated with vein stockworks that occurs preferentially in the coarser, brittle siltstones and sandstones.
The mineralised rocks have been deeply weathered to below 100 metres in places to form saprolite mineralisation (oxide). With the percentage of available oxide ore decreasing, a feasibility study to investigate the exploitation of fresh rock material was completed in December 2015. The CIL combination plant conversion project began in 2017. The plant conversion will allow the mine to treat six million tonnes of hard rock ore and six million tonnes of oxide ore. Construction was completed in March 2019 and the project is now concluded.
Geita Gold Mine is wholly owned by AngloGold Ashanti and is AngloGold Ashanti's sole operation in Tanzania.
Tanzania - Geita
The Geita Gold Mine is located in the Lake Victoria goldfields of the Mwanza region of Tanzania, about 120 kilometres west of Mwanza, four kilometres away from the town of Geita and 910km from the Tanzanian commercial city of Dar es Salaam. It has been in operation since 1996.
Mining at Geita is by both open pit and underground methods. Historically, other pits such as Star and Comet, Matandani and Kukuluma have contributed to the ore feed. Current sources of ore are from the Nyankanga open pit mine stockpile (where mining ended in September 2020) and Star and Comet and Nyankanga underground mines. In 2016, underground mining commenced at Star and Comet to provide ore to the processing plant. This was joined in 2017 by the Nyankanga underground operations. The Geita Gold Mine is currently serviced by an average of 5.2Mtpa CIL processing plant. The circuit contains a primary gyratory crusher, secondary and tertiary crushers, a semi-autogenous mill, ball mill and 12 leach tanks. This is coupled with a gravity circuit using two knelson concentrators. In planning the plant feed blend material hardness, grade and sulphide content are considered in order to optimise throughput and recovery. Power to the mine is self-generated.
The special mining licence (SML45/99) covers approximately 196.17km2 and expires on 26 August 2024. There are a further 120km2 of prospecting licences in the immediate vicinity to the special mining licence which do not contain any Ore Reserve. 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.
The terrain is Archaean in age and generally characterised by greenschist metamorphism, although amphibolitic metamorphism occurs in places. Ore zones are usually associated with Banded Iron Formation (BIF) or other iron rich rocks and typically when they are in contact with intrusive rocks such as diorites. These contacts have been deformed and act as fluid pathways for the mineralising fluids. Gold mineralisation is associated with alteration that includes sulphides such as pyrite and arsenopyrite, whilst other minerals such as hematite, magnetite, quartz, calcite, dolomite, biotite and chlorite also occur.
The Americas includes mining operations in two countries, Brazil and Argentina, advanced greenfields projects in Colombia and exploration activities in the United States. Mining is from both open pit and underground, with AGA Mineração Cuiabá and Lamego being underground mines and Cerro Vanguardia, Serra Grande and AGA Mineração Córrego do Sítio being a combination of open pit and underground mines.
Cerro Vanguardia, in which AngloGold Ashanti has a 92.5 percent stake, is our sole operation in Argentina. Fomicruz, a state company, owns the remaining 7.5 percent. The operation is operated by AngloGold Ashanti.
Argentina - Cerro Vanguardia
Cerro Vanguardia is located approximately 110 kilometres north-northwest of the coastal town of Puerto San Julian in the province of Santa Cruz. Cerro Vanguardia is a gold-silver mine with multiple small open pits with high stripping ratios and multiple narrow-vein underground mines, located at different parts of the property but mined simultaneously.
Cerro Vanguardia commenced as an open pit operation in 1998 and this was supplemented in 2010 with the start of shallow underground mining to access high-grade material. To complement the already existing gold plant, a heap leach operation was started in 2012. The mine has been operated by AngloGold Ashanti since 1998. The orebodies comprise a series of epithermal vein deposits containing gold and large quantities of silver, which is mined as a by-product. The metallurgical plant includes a cyanide recovery facility. Production capacity of the heap leach facility, which was commissioned in 2012 and processes lower-grade material, is around 1.5Mtpa at gold and silver grades of around 0.65g/t and 17g/t respectively. Eight natural gas power generators (two as a back-up) fed by a 40 kilometre long pipeline provide electricity to the operation.
The mining lease encompasses an area of approximately 543km2. The licence 402642/CV/97 covers the full Ore Reserve, was issued on 27 December 1996 and expires on 26 December 2036.
The oldest rocks in this part of Patagonia are metamorphics of the Precambrian-Cambrian age. These are overlain by Permian and Triassic continental clastic rocks which have been faulted into a series of horsts and grabens and are associated with both limited basaltic sills and dykes and with calc-alkaline granite and granodiorite intrusions. Thick andesite flows of Lower Jurassic age occur above these sedimentary units. A large volume of rhyolitic ignimbrites was emplaced during the Middle and Upper Jurassic age over an area of approximately 100,000 square kilometres. These volcanic rocks include the Chon Aike formation ignimbrite units that host the gold bearing veins at Cerro Vanguardia. Post-mineral units include Cretaceous and Tertiary rocks of both marine and continental origin, the Quaternary La Avenida formation, the Patagonia gravel and the overlying La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.
Gold and silver mineralisation at Cerro Vanguardia occurs within a vertical range of about 150 metres to 200 metres in a series of narrow, banded quartz veins that occupy structures within the Chon Aike ignimbrites. These veins form a typical structural pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in response to this shearing.
The veins are typical of epithermal, low-temperature, adularia-sericite character and consist primarily of quartz in several forms: massive quartz, banded chalcedonic quartz, and quartz-cemented breccias. Dark bands in the quartz are due to finely disseminated pyrite, now oxidised to limonite. The veins show sharp contacts with the surrounding ignimbrite which hosts narrow stockwork zones that are weakly mineralised and appear to have been cut by a sequence of north-east-trending faults that have southerly movement with no appreciable lateral displacement.
AngloGold Ashanti’s operations in Brazil comprise AngloGold Ashanti Córrego do Sítio Mineração (AGA Mineração) in the Quadrilátero Ferrífero, Minas Gerais state and Mineração Serra Grande (MSG) in Goiás state. All operations are wholly owned by AngloGold Ashanti. AngloGold Ashanti generates part of the power for its operations in Brazil at the Rio de Peixe hydroelectric plants and through its stake in the Igarapava consortium. The balance is purchased on the open market in long term contracts to secure supply.
Brazil - AngloGold Ashanti Córrego do Sítio Mineração S.A.
AngloGold Ashanti Córrego do Sítio Mineração S.A. (AGA Mineração), consists of several mining operations, namely Cuiabá, Lamego and Córrego do Sítio.
The Cuiabá complex includes the Cuiabá and Lamego mines and the Cuiabá and Queiroz plants. The Cuiabá and Lamego mines are located near Sabará, southeast and east respectively of the city of Belo Horizonte, the capital of Minas Gerais state, in the southeast of Brazil. The Cuiabá mine is a mix of cut-and-fill and long hole stopes accessed by ramps and a shaft. Lamego is a nearby mine developed to mine underground sulphide ore. The first stage of the processing of the ore from Cuiabá and Lamego mines is in the gold plant at the Cuiabá complex, where concentrate is produced. The material is then transported 15 kilometres by aerial ropeway to the Queiroz plant where the concentrate is roasted, and the calcine proceeds to a carbon circuit for further refining. Sulphur gas is captured for processing through the acid plant. Approximately 230ktpa of sulphuric acid is produced as a by-product. Capacity of the complete circuit is 2.1Mtpa. The Cuiabá mine became operational in 1988 and the Lamego mine in 2009.
Córrego do Sítio (CdS) is located in the municipalites of Santa Bárbara and Barão de Cocais, 90 kilometres east of the city of Belo Horizonte in the Minas Gerais state, in the southeast of Brazil. The CdS gold complex has been in operation since 1989 and consists of two operations: an oxide open pit mine and two sulphide underground mines known as CdS I and CdSII. There are two metallurgical plants in CdS: the heap leach plant for oxide ore and the sulphide plant. The sulphide process consists of crushing, grinding and gravity concentration, flotation, thickening, acidulation, pressure oxidation (POX autoclave), CIL extraction, elution, neutralisation, electro-winning and tailings disposal. The plant and POX circuit have a capacity of 600ktpa. The heap leaching process consists of crushing, agglomeration, stacking, leaching, adsorption, elution and electrowinning with a total capacity of 650ktpa. Total capacity of the complete circuit is 1.5Mtpa.
Cuiabá is covered by a single concession granted by the Brazilian National Mining Agency (ANM), namely 000.323/1973 held by AGA Mineração, covering a total area of 3,662ha. Lamego is covered by three geographically contiguous ANM concessions granted to AGA Mineração, namely concession 830.720/1981, 831.554/1983 and 832.238/2003 covering a total area of 1,622.68ha. CdS is covered by four ANM concessions, namely 930.556/2000; 930.181/2008; 830.129/1982 and 833.472/2003 covering a total of 5,461.07ha. According to Brazilian mining laws, expiry of claims, licenses, and other tenure rights coincide with the depletion of Ore Reserves, cessation of mining operations and legally required post-operations activities (e.g. mine closure), provided all annual reports have been approved by the ANM.
The area in which AGA Mineração is located is known as the Iron Quadrangle and is host to historic and current gold mining operations, as well as a number of open-pit limestone and iron ore operations. The geology of the Iron Quadrangle is composed of Proterozoic and Archaean volcano‑sedimentary sequences and Pre‑Cambrian granitic complexes. The host to the gold mineralisation is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas Supergroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at Sabara Municipality, has gold mineralisation associated with sulphides and quartz veins in Banded Ironstone Formation (BIF) and volcanic sequences. At this mine, structural control and fluids flow are the most important factors for gold mineralisation with a common association with large-scale shear zones and their associated structures. Where BIF is mineralised the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply plunging shear zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears and other structures.
The controlling mineralisation structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile environment. The host rocks at Cuiabá are BIF, Lapa Seca and mafic volcanics (principally basaltic). Mineralisation is due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and carbonaceous graphitic schists. Sulphide mineralisation consists of pyrrhotite and pyrite with subordinate arsenopyrite and chalcopyrite; the latter tends to occur as a late-stage fracture fill and is not associated with gold mineralisation. Wall rock alteration is typically carbonate, potassic and silicic.
CdS is located in the eastern part of the lower to middle greenschist facies archean Rio das Velhas greenstone belt. The CdS I, II and III gold deposits and associated targets are located in a gold trend that extends for about 14 kilometres in a north-easterly direction, from Grota Funda (CdS I) in the south to Jambeiro (CdS III) in the north. CdSII is the north portion of the Corrego do Sítio gold trend. The main gold targets and deposits are distributed over three trends, namely the CdS trend, the Donana Trend and the Cristina Trend. At CdSI, the main orebodies are Rosalino, Cachorro Bravo, Laranjeiras and
Carvoaria, which are currently producing and are the most relevant deposits at Mine I. At CdSII, the main orebodies are São Bento, Pinta Bem (both BIF hosted) and Sangue de Boi (metapellitic hosted). At CdSIII, Anomalia I and II represent the best informed orebodies with the highest potential (for formal declaration purposes, CdSIII deposits are incorporated as CdSII). CdS mineralisation occurs in a greenstone belt geological environment, where gold is associated with quartz and sulphides (mainly very fine arsenopyrite acicular crystals) in a structurally controlled corridor of approximately 16 - 20 kilometres on strike and about 500 metres vertical extent, developed in a compressional tectonic setting.
Brazil - Mineração Serra Grande (S.A.)
Mineração Serra Grande (MSG or Serra Grande) is located in central Brazil, in the state of Goiás, about five kilometres from the city of Crixás and 420km from the Brazilian capital, Brasilia. It operates three underground and two open pit mines. Three mining methods used underground are: sub-level stoping (bottom-up and top-down), room and pillar. The metallurgical plant has the capacity of 1.5Mtpa and combines CIL and gravimetric circuits. The ore is blended to feed the crushing circuit with a capacity of 3,800tpd. There are two mills in operation, and 20 leaching tanks with capacity of 4,800m3 divided between preliming and cyanidation stages. About 58% free gold is captured in the parallel gravity circuit. The rest of the gold is recovered by the CIL process to form the bullion that is sent to the Nova Lima refinery. The mine became operational in 1989 and has been operated by AngloGold Ashanti since 1999.
Serra Grande is covered by five ANM concessions, namely 002.286/1935, 960.658/1987, 860.746/2005, 862.103/1994 and 804.366/1975 covering a total area of 6,563.51ha. According to Brazilian mining law expiry of claims, licenses, and other tenure rights coincide with the depletion of Ore Reserves, cessation of mining operations and legally required post-operations activities (eg mine closure), provided all annual reports have been approved by the ANM.
The deposits are located in the Rio Vermelho and Ribeirão das Antas Formations of the Archaean Pilar de Goia’s Group which account together for a large proportion of the Crixás Greenstone Belt in central Brazil.
The stratigraphy of the belt is dominated by basics and ultrabasics of the lower sequences with volcano sedimentary units forming the upper successions.
The deposits are hosted in a sequence of schists, meta volcanics and dolomites occurring in a typical greenstone belt structural setting. Gold mineralisation is associated with massive sulphides and vein quartz material associated with carbonaceous and sericitic schists and dolomites. The oreshoots plunge to the north-west with dipping between 6 and 35 degrees. The stratigraphy is overturned and thrusted towards the east, with recognised shear and thrust structures that are stacked. These control the mineralisation and behave as frontal and lateral ramps and horses.
The greenstone belt lithologies are surrounded by the TTG suite of Archaean tonalitic gneisses and granodiorites. The metamorphic sediments are primarily composed of quartz, chlorite, sericite, carbonaceous material and garnet bearing schists. The carbonates have been metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding wallrock, usually associated with quartz veins. The basalts are relatively unaltered but do show pronounced stretching with elongation of pillow structures being evident.
The Crixás greenstone belt comprises a series of Archaean to Palaeoproterozoic metavolcanics, metasediments and basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (D1) was accompanied by significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime. D1 thrusting developed irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main Crixás orebodies are adjacent to a major north‑northwest structural corridor juxtaposed to the main fault ramp/corner and become dispersed to the east and north in zones of foreland thrust flats. Alteration diminishes to the west away from the main fault corner. A series of concealed east-west to northwest‑southeast basement block faults may have provided secondary fluid migration, and development of early anti‑formal warps in the thrust sheets; these structures probably define the quasi‑regular spacing of significant mineralisation within the belt. The D1 thrust stack was gently folded by non‑cylindrical folds. Gold mineralising fluids probably migrated during this event, with similar south‑south‑west to north‑north‑east migration, and focusing on bedding slip during folding. Gold mineralisation decreases and disperses to the north and east along the formal thrust flat zone. Concentrations of gold within the quartz vein may be due to the damming of fluids migrating upward along layering.
Colombia has two advanced Greenfields Projects with Ore Reserve declaration, Quebradona and Gramalote, and a third Greenfield project, La Colosa, voluntarily suspended since 2017 due to force majeure recognized by the Colombia national mining authority, relating to environmental permits required to continue the exploration activities.
Colombia - Gramalote
The Gramalote project is a joint arrangement between AngloGold Ashanti and B2Gold Corp (B2Gold). Since the beginning of 2020, B2Gold is responsible for the management of the Gramalote joint operation and AngloGold Ashanti and B2Gold now each hold 50 percent of the attributable shares in Gramalote Limited.
The property is located near the town of Providencia and San Jose del Nus within the municipality of San Roque in the, northwest Department of Antioquia, Colombia. It is approximately 124 kilometres northeast of Medellin which is the regional capital of the Antioquia Department. The region encompassing Gramalote has a long history of artisanal gold mining. Gramalote itself has had small scale artisanal mining for several decades prior to exploration work and mineral discovery by AngloGold Ashanti.
Development of the Gramalote project commenced with a scoping study in 2009. Several studies followed, leading to submission of a prefeasibility study in late 2013, which did not meet investment hurdles. From 2014 to 2017 intensive work was undertaken by all technical disciplines to identify ways to improve the project economics. The main changes were an improved orebody model, grade streaming to increase the feed grade in the early years and early treatment of the oxide ore that overlies the main sulphide resource. An enhanced prefeasibility study was completed in September 2017, which supported the reporting of a maiden Ore Reserve. During 2020, for the feasibility study, an updated resource model was completed, providing information necessary for the pit design. Also in 2020 the process plant designs and the mining engineering and metallurgical studies were completed; the Infrastructure design work continues in 2021. The results of the feasibility study are expected in the second quarter of 2021 which will be submitted for board approval.
Gramalote comprises one integrated exploitation concession and one exploration concession which was granted in June 2019. The first, the 14292-concession totalling 8,720.71ha, expires on 3 April 2043 and contains the Gramalote and Monjas deposits. The second is the 4894 concession which covers 2,292.81ha and hosts the Trinidad deposit. In 2016, the project received its environmental and construction permits to operate for the life of mine. According to Colombian mining law the exploration phase begins as soon as the concession contract is registered in the National Mining Registry. The total period for the concession contract (exploration, installation and construction, and exploitation) is 30 years, which may be renewed for an additional 20-year period. Under Colombian mining law, producing mines are subject to a federal royalty of four percent on 80 percent of the value of gold and silver production. Thus the Gramalote net royalty is 3.2 percent on gold and silver production.
The Gramalote deposit is located in the northern portion of the Central Cordillera of Colombia. The terrain is mainly composed of a metamorphic basement complex and the Antioquia Batholith. The terrane of the Cajamarca-Valdivia basement consists of metamorphic rocks, volcanic rocks, oceanic ophiolites and intrusive rocks. The Antioquia Batholith, which is of Upper Cretaceous age, covers an area of 7221 km2 and constitutes the core of the Central Cordillera. About 92 percent of this intrusive corresponds to tonalite and granodiorite and eight percent to two subordinate types of rocks - granodiorite to quartz-monzonite and gabbro. From a structural point of view, the Antioquia Batholith has a history of uplift. Major lineaments affect the batholith, especially in its eastern sector where they trend west northwest varying to northwest, where they show rotation and sinistral shear movement. Westward dextral transpression dominates along the Romeral Fault System.
Gramalote is an intrusive-hosted structurally controlled stockwork gold and silver deposit. Mineralisation is controlled by north-east/south-west trending shear zones and north-northwest/ south-southeast trending shear extensional zones affecting the tonalites and granodiorites of the Antioquia Batholith. Gold mineralisation is associated with three overprinting and texture destructive alteration assemblages namely: potassic, quartz-sericite and sericite carbonate. Within these alteration zones, anomalous gold mineralisation is associated with three types of quartz vein stockworks. These include quartz veinlets with fine-grained pyrite, quartz-carbonate veinlets and quartz veinlets with granular pyrite.
Colombia - Quebradona
The Quebradona project is situated in the Middle Cauca region of Colombia, in the Department of Antioquia, 60 kilometres south-west of Medellin. The Quebradona project is 100% owned and managed by AngloGold Ashanti, after B2Gold was diluted in 2019 and became entitled to receive a royalty which will be bound by the Terms of the Royalty Agreement. The project has completed a conceptual study in 2016, as well as a prefeasibility study in 2019, which supported the reporting of a maiden Ore Reserve.
The feasibility study currently underway is expected to be completed in early 2021. Following the completion of the feasibility study, the project will be submitted for board approval. If approved, the project will require receipt of environmental and mining licenses to start implementation.
Five main targets have been identified, namely Nuevo Chaquiro, Aurora, Tenedor, Isabela and La Sola. Nuevo Chaquiro is the most advanced of the targets. Nuevo Chaquiro, a significant copper-gold porphyry, is one of five known porphyry centres on the property and has been the focus of exploration activities since the beginning of 2011 with more than 75 kilometres of drilling completed. Nuevo Chaquiro was the sole deposit considered in the feasibility study.
Quebradona comprises one tenement (5881) which is the result of the integration of the five original tenements (5869, 6318, 6359, 7579 and 5881). Integrated tenement 5881 was issued on the 9 December 2016 and totals 7,593ha and is valid until May 2037.
Quebradona will be a copper mine with gold and silver as by-products. The project is close to existing highway, state and rural roads, and HV/MV power infrastructure. The planned mining method is sub level caving. The planned underground infrastructure consists of an adit to access the orebody and number of internal vertical ore passes that gravity feeds to the main ore transfer level. The material will be transferred to the main internal crusher by load and haul dump vehicles. Crushed material will then be transferred downhill to surface via a six kilometre conveyor, in a dedicated adit to a coarse ore stockpile. The project is expected to treat 6.2Mt annually to produce three billion pounds of copper and 1.5Moz of gold and 21Moz of Silver over a potential 23-year life.
The host rock geology of Nuevo Chaquiro comprises a volcaniclastic sequence of Miocene age (ash, tuffs, agglomerates and andesites) intruded by small dykes of diorite and quartz diorite, also of Miocene age. The intrusions are by various pulses of diorites with the primary intrusive being a fine to medium grained quartz diorite. Most of the intrusives do not outcrop. These intrusives are categorised into pre-mineral, early, intra-mineral and late, according to cross cutting relations, locality and copper-gold values. The developed alteration follows a well zoned porphyry type alteration system ranging from a high temperature, potassium silicate central zone (biotite, magnetite, chalcopyrite, and molybdenite), which trends into an overlying sericitic alteration zone (muscovite, chlorite, quartz, pyrite,+-tourmaline) surrounded by more distal propylitic alteration (chlorite, epidote, illite, carbonate). There is also an inner core of calcic-potassic alteration featuring biotite, actinolite, epidote, and anhydrite with lower copper, gold and molybdenum values. The mineralised zone is characterised by fine stock works, disseminations and veinlets of quartz, magnetite, pyrite, chalcopyrite and molybdenite.
The Australia Region operates two gold mines in Western Australia, Sunrise Dam, which is wholly owned, and Tropicana, a JV with IGO Limited (IGO). AngloGold has a 70% stake and is manager, and IGO holds 30%. Open pit and underground mining occur at both operations.
Australia - Sunrise Dam
Sunrise Dam, which is wholly owned, is located 220 kilometres northeast of Kalgoorlie and 55 kilometres south of Laverton in Western Australia. Underground mining, which is conducted by a contract mining company, is the primary source of ore, with supplementary mill feed in 2020 provided by stockpiles. Development of a satellite open pit mine at Golden Delicious began in the fourth quarter of 2020 and from the third quarter of 2021 open pit ore will fully replace low-grade stockpiled ore in mill feed.
Open pit production began in 1997 and the pit was completed at a final depth of 500 metres below surface in 2014. Underground mining commenced in 2003 with a number of different mining methods being applied, depending on the style of mineralisation and grade of the geological domain. By 2014, the mine was wholly an underground mining operation with mill feed supplemented by stockpiles. The underground mining infrastructure has been upgraded with additional power feed installed in 2017 and a major ventilation fan upgrade completed in 2018.
Sunrise Dam operates within two mining leases covering over 7,800ha, which are in good standing with the expiry dates in 2038. All Mineral Resource, Ore Reserves and mine infrastructure are hosted within lease M39/1116 while lease M39/1117 hosts water extraction infrastructure used to supply the operation with water.
Mining is carried out by underground mining contractors and productivity improvements over the past few years has seen total underground tonnages mined reach a steady state of around 2.8Mtpa. This has been possible by the use of bulk mechanised sub-level open stoping using stabilising pillars and waste backfill where possible. Ore is treated in a conventional gravity and CIL process plant equipped with a fine grind and flotation circuit which was commissioned in the second half of 2018. The plant throughput rate for Sunrise dam is 4.1Mtpa. Power at Sunrise Dam is self-generated, and the mine uses natural gas supplied via an APA Operations (Pty) Limited pipeline. Pre-stripping of the Golden Delicious satellite pit, 12 km from the Sunrise Dam processing plant, began in the fourth quarter of 2020. Ore production from Golden Delicious is scheduled to being in the second quarter of 2021.
Gold ore at Sunrise Dam is structurally and lithologically controlled within gently dipping high strain shear zones and steeply dipping brittle-ductile low strain shear zones. Host rocks include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.
Australia - Tropicana
Tropicana, a joint venture between AngloGold Ashanti (70 percent and operator) and IGO Limited (30 percent), is located 200 kilometres east of Sunrise Dam and 330 kilometres east-northeast of Kalgoorlie Boulder, Western Australia. Open pit mining began during 2012 with first gold production occurring in September 2013. The operation features a large scale, modern processing plant which uses conventional carbon-in-leach technology and includes high-pressure grinding rolls for energy-efficient comminution. Open pit mining activities are carried out by a contract mining company and the plant is owner operated. The Boston Shaker underground mine at Tropicana started commercial production in September 2020.
Tropicana has security of tenure for all current exploration licenses and the mining lease that covers its future Ore Reserve. This lease is M39/1096 and is valid from 11 March 2015 to 10 March 2036 covering a total area of 27,228ha.
All surface infrastructure facilities are in place and operational. The processing plant and TSF are operating within design specifications. The infrastructure includes, but is not limited to, a dedicated gas and diesel power station, water supply, processing plant, mine, dewatering infrastructure, TSF, workshops, camp facilities and airstrips. Tropicana utilises a three-stage crushing circuit, inclusive of energy-efficient high-pressure grinding roll technology, followed by conventional ball mill grinding and a carbon-in-leach gold leach circuit. Throughput in 2020 was 8.83Mtpa. Power is supplied to the mine by an on-site gas and diesel power station, with natural gas supplied via an APA Operations (Pty) Limited pipeline.
Gold mineralisation at Tropicana occurs in high metamorphic grade gneissic rocks, which dip gently to the south east. Mineralisation is structurally controlled and occurs within a preferred host unit within the gneissic package. Post mineralisation faulting has separated the once continuous ore zone, with open pits developed on each of the fault bounded blocks.
The combined Proven and Probable gold Ore Reserve of the group amounted to 29.5 million ounces (Moz) as at 31 December 2020. The Probable copper Ore Reserve of the group amounted to 3,105 million pounds (Mlb) as at 31 December 2020 (amounts provided in Ore Reserve are attributable.)
Ore Reserve estimates are reported in accordance with the requirements of the SEC’s Industry Guide 7. Accordingly, as of the date of reporting, all Ore Reserve is planned to be mined out under the life-of-mine plans within the period of AngloGold Ashanti’s existing rights to mine, or within the renewal periods of AngloGold Ashanti’s rights to mine. In addition, as of the date of reporting, all Ore Reserve is covered by required mining permits or there is a high probability that these approvals will be secured.
AngloGold Ashanti has standard procedures for the estimation of Ore Reserve. These standard procedures are performed by experienced technical personnel at the mining operations and reviewed by regional and corporate Competent Persons.
The underground Ore Reserve determination is based on an automated software process called MSO (Mineable Shape Optimiser) which is a feature within the Datamine software package. MSO runs over the grade block model and uses economic and mining parameters set by the mining engineer to produce optimal mining volumes which maximise the Mineral Resource extraction. The process runs above a cut-off and caters for practical mining parameters such as minimum and maximum mining width, anticipated wall dilutions, minimum and maximum wall angles, minimum separation distances between parallel and sub-parallel stopes, and minimum and maximum stope heights and widths. The outputs are evaluated by the mining engineer and adjusted as required to ensure mineability. The process uses all classifications of material, but only the Measured and Indicated Mineral Resource portions are used to quote the Ore Reserve. A financial test is run whereby all Inferred Mineral Resource is set to zero value and the remaining Measured and Indicated Mineral Resource must still provide a positive financial return.
In the case of open-pit mines the procedure is as follows: revenue and costs are calculated for each mining block within a three-dimensional model of the ore body using estimated values for gold price, operating costs and metallurgical recoveries. An optimization process is then applied to determine the combination of blocks within the model that make a positive contribution under these estimations. Block selection is within a shell whose limits are defined by the planned slope angles of the pit. Within this process, a cut-off grade is applied which determines the ore blocks to be treated and included in the Ore Reserve. These blocks are scheduled with consideration being given to practical mining constraints and limitations. Scheduled ore blocks that are classified as Proven or Probable constitute the Ore Reserve.
The gold price used for determining the 2020 and 2019 Ore Reserve are outlined in the following table:
|Ore Reserve Gold Price||1,479||1,200||1,307||$ per ounce|
The copper price used for determining the 2020 and 2019 Ore Reserve are outlined in the following table:
|Ore Reserve Copper Price||2.82||2.65||2.83||$ per pound|
The SEC test indicates all of the SAMREC Ore Reserve, apart from the CVSA operation, is economic and meets the requirements of the SEC. The CVSA SEC Reserve is 0.20Moz less than the SAMREC Ore Reserve due to the hyperinflation of the ARS rate where the three-year average exchange rate of 49.46 is much lower than the AGA planning exchange rate (based on the last year's rates only) of 99.69.
AngloGold Ashanti selects a conservative Ore Reserve price relative to its peers, in line with AngloGold Ashanti’s strategy of including a margin in the mine planning process. The resultant plan is then valued at a higher business planning price.
In South Africa, AngloGold Ashanti is legally required to publicly report Ore Reserve and Mineral Resource according to the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves (The SAMREC Code, 2016 edition). The SEC’s Industry Guide 7 does not recognise Mineral Resource. Accordingly, AngloGold Ashanti does not report estimates of Mineral Resource in this annual report on Form 20-F.
The AngloGold Ashanti Ore Reserve reduced from 43.8Moz in December 2019 to 29.5Moz in December 2020. This gross annual decrease of 14.3Moz includes depletion of 3.4Moz, and disposal of assets in the South African region and Sadiola of 16.7Moz. This is offset partly by additions due to exploration and modelling changes of 4.5Moz, changes in economic assumptions of 1.0Moz and other factors of 0.3Moz. The Ore Reserve was estimated using the AngloGold Ashanti gold price of US$1,200/oz (2019: US$1,100/oz). The principal changes in AngloGold Ashanti’s Ore Reserve as at 31 December 2020, compared with those published as at 31 December 2019, are as follows:
|ORE RESERVE - GOLD||Moz|
|Ore Reserve as at 31 December 2019||43.8|
|Vaal River Surface||(2.1)|