Our external operating context
The environment in which AngloGold Ashanti operates is dynamic and often complex, influencing delivery on our strategy and our ability to create value.
The impact of the COVID-19 pandemic was profound, bringing a series of challenges to our operating environment and wider society, damaging economies and leading to heightened geopolitical tensions, uncertainty, increased inequality and rising poverty. Against this backdrop, investors increased the call for companies in which they invest to improve their own sustainability, improve governance and put in place practices that will improve their contribution to society and reduce their impact on the environment.
Externally, AngloGold Ashanti was primarily affected by:
COVID-19 pandemic
Global macro-economics and geopolitics
Uncertain and increasingly rigorous regulatory requirements
Growing climate crisis and growing pressure to decarbonise
Increasing stakeholder/societal expectations
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Pressure from international credit ratings
COVID-19 pandemic
Explanation and impact
The pandemic has had far-reaching social and economic impacts.
As governments rolled out measures to limit the spread, operations were halted in some regions. Society has been severely impacted by extended and repeated lockdowns which have ravaged economies and eroded societal norms.
Our response
- Actively worked to mitigate the impact of significant disruptions, operational or otherwise, due to COVID-19
- Supporting host governments, NGOs and communities
- Established a cross-functional team to manage crisis response
- Strict operating protocols implemented at all operations
- Site contingency plans under regular testing and review
- Halt non-essential travel and tighten approvals for essential travel
- Increased awareness, surveillance and screening
- Implement strict quarantine and isolation protocols
Outlook
Although several vaccines have been approved on an emergency basis, vaccine demand will likely far outstrip supply for some time. Vaccine programmes are largely directed by governments and influenced by the shortage of doses globally. We are actively monitoring the situation and have in place vaccine protocols and guidance aligned with host government policies.
We are committed to ethical and responsible sourcing of vaccines in a manner that does not disadvantage vulnerable and high-risk groups. We are working to ensure that our high-risk employees and their families are included in national priority lists and vaccination programmes.
Capitals affected
Related strategic focus areas
Global macro-economics and geopolitics
Explanation and impact
Economic uncertainty and heightened geopolitical tensions impact a number of factors that can influence commodity prices, exchange rates, and interest rates. These factors together with investor sentiment influence the gold price, which in turn affects the health of our business.
The COVID-19 pandemic led to economic shutdowns around the world. The International Monetary Fund estimates that the global economy shrank by 3.5% in 2020. In response to uncertainty created by the pandemic, and to the extraordinary measures taken by governments to lessen its economic impact, the average gold price rose by 27% year on year. Gold revenues in 2020 were further boosted by weaker local currencies in Brazil, Argentina and South Africa.
Our response
- To manage the variables within our control
- Renewed emphasis on our ‘Operational Excellence’ initiatives to optimise operating processes and reduce costs, while ensuring our workforce is fully engaged and appropriately skilled
- Optimise our portfolio to reduce costs and maximise margins
- Strengthen the balance sheet by reducing debt improving available liquidity and the average cost of borrowings
- Disciplined capital allocation for exploration projects to extend mine life and improve the quality of our portfolio
Outlook
Geopolitical developments including the US-China trade war, increased nationalism and political polarisation, the conclusion of Brexit and its uncertain long-term impacts, and the ongoing pandemic and its effects, may create ongoing uncertainty that supports the gold price. Conversely, a robust economic recovery in the US, Europe and China, aided by a successful vaccine roll-out, may bring with it rising interest rates and consequent downward pressure on the gold price.
Capitals affected
Related strategic focus areas
Growing climate crisis and increasing pressure to decarbonise
Explanation and impact
Changing rainfall patterns, rising sea levels, higher temperatures, reduced availability of potable water and extreme weather conditions caused by global climate change remain growing concerns for businesses, investors, broader society and governments. This has led to growing pressure to reduce greenhouse gas (GHG) emissions and to limit energy and water usage and to promote responsible practices in line with the Conference of the Parties (COP) on Climate Change, the Paris Agreement, the SDGs and the Task Force on Climate-related Financial Disclosures (TCFD).
Our response
- Maintain focus on improving ESG performance, and developing an appropriate climate strategy with related targets
- Identify and align corporate targets with SDGs and other guidelines
- Aim to align reporting on environmental management and climate-related impact with guidelines and recommendations of the TCFD – work underway for 2021 disclosure
- Established a Climate Change Working group to focus on the related strategy and transition processes, to develop metrics and targets, and oversee implementation
- Maintain compliance with company frameworks, standards and guidelines, as well as external ones including the ICMM, the Principles for Responsible Investment (PRI) supported by the UN, the United Nations Global Compact and the World Gold Council’s Responsible Gold Mining Principles, among others
Outlook
Pressure from governments, investors and broader society that companies improve environmental stewardship and reduce GHG emissions, both absolutely and in terms of consumption rates per tonne mined, is likely to intensify. This trend is being driven by national commitments under the Paris Agreement to limit average global temperature increases to less than 1.5 degrees Celsius by 2050. To achieve this, global emissions are projected to need reductions of 8-10% annually between 2020 and 2050. We had in place emission-intensity targets to achieve a 30% reduction in GHG emissions per tonne processed, by 2022, from our 2007 base. This target was met in 2018. Work is underway during 2021 to set new medium-term targets, and then to progress work toward charting a pathway to net zero emissions. Our power mix already includes hydro-electric energy in the DRC and Brazil, while our planned Colombia projects will be largely hydro-powered. Our Australian operations, previously powered by diesel generators, now use natural gas.
Capitals affected
Related strategic focus areas
Uncertain and increasingly rigorous regulatory requirements
Explanation and impact
Regulatory certainty facilitates decision making in relation to long-term investments in mining assets with lives spanning several decades. Regulatory changes relating to mining rights, the payment of taxes and royalties, and operating or closure and decommissioning requirements can impact investment returns.
More onerous regulations can result in an increased cost of compliance, which may be compounded by uncertainty in the understanding or application of legislation. This can affect the financial position of the business and its sustainability as well as relationships with government and regulators.
Our response
- Engage constructively with governments, local stakeholder groups and regulators to optimise the shared value and benefits derived from the orebody among stakeholders
- Carefully monitor regulatory changes to ensure compliance and facilitated long-term planning
Outlook
While we engage regularly with all governments and regulators, particular attention is given to negotiations with regulators in Colombia (mining and environmental permitting), Tanzania (on taxation), and other countries in Africa (Guinea, Tanzania and Ghana) that are considering legalising or formalising small-scale and artisanal mining. We are also committed to implementing the Global Industry Standard on Tailings Management and remaining abreast of regulations governing the management of TSFs. Conversion of our TSFs in Brazil to dry-stacking is underway. We engage consistently with host governments and monitor and evaluate actual or anticipated regulatory changes, for timely implementation and compliance.
Capitals affected
Related strategic focus areas
Increasing stakeholder/societal expectations
Explanation and impact
Companies, particularly those in the extractive industries, face increased scrutiny worldwide from an array of stakeholders:
- Providers of capital and ratings agencies have increasingly exacting expectations relating to financial, operating performance and ESG performance
- Governments’ expectations relate to contributions to the fiscus and to national and local economies, as well as partnerships to facilitate service delivery and social and economic development
- Communities’ expectations relate to socio-economic benefits – local employment and procurement opportunities, and the provision of infrastructure, healthcare and education
Our response
- Engage constructively with stakeholders to better understand their requirements, to consistently manage their expectations, and to secure and maintain our social licence to operate
- Deliver on related strategic objectives and commitments
- Ensure responsible corporate citizenship, in line with our values
- Maintain and improve our ESG performance – set targets and transparently report progress made in meeting these targets
- Create shared value for communities in host countries – through employment and procurement opportunities, and by investing in socio-economic initiatives that promote long-term resilience and self-sufficiency
Outlook
There has been increasing expectation from governments, investors and broader society for greater disclosure on ESG performance and sustainability metrics in general. We will continue aligning our community engagement with the principles of engagement for Indigenous Peoples and First Nations communities where applicable. On disclosure, we have comprehensive ESG data sets available on our website, which are updated regularly, and we will continue to participate annually in a number of ESG rating agency surveys and aim to respond promptly to related queries. The COVID-19 pandemic has enhanced the importance of community health work; we have reacted by engaging more closely with governments and communities and providing medical and protective equipment, donations and delivered awareness and educational campaigns. We continue our successful malaria programmes in Ghana, Guinea and Tanzania, initiatives to protect our sites and communities from Ebola, and our COVID-19 support initiatives, among others. For more detail see our <SR>, COVID-19 response.
Capitals affected
Related strategic focus areas
Pressure from international credit ratings
Explanation and impact
As the ratings agencies assess the credit risk of a company and their ability to honour its debt obligations, the assessments sometimes take into account the jurisdiction within which the company is located or operates as the country’s political, economic and regulatory environment can have an impact on the company.
Our response
- Engage regularly with ratings agencies to ensure an accurate understanding of our potential operating and financial performance
- We continue to look at operational efficiencies that make our mines more consistent in production, more resilient to gold price volatility and thus providing stable and sustainable cash flows.
- Current company ratings are as follows:
- S&P: BB+/positive
- Moody’s: Baa3/negative
- Fitch: BBB-/stable
Outlook
While we remain headquartered in Johannesburg, South Africa, and retain our primary listing on the JSE, the impact of South Africa’s rating by Fitch, Moody’s and S&P has decreased. However, we remain exposed to other lower-rated sovereign countries. Our overall credit rating has improved since 2019, a result of a more stable operating performance, improved cash generation, and consistent delivery on our strategic objectives, with the agencies taking greater account of the consistent delivery on our strategic objectives.
Capitals affected
Related strategic focus areas
Principal uses of gold
Investment
- Gold is a long-term store of value independent of other assets. As its price often moves contra-cyclically, it can protect or enhance the performance of an investment portfolio and reduce volatility. The volumes of gold bought by investors have increased steadily over the past three decades. Investment demand increased by 40% in 2020 owing to increased economic uncertainty, increased stock of negative-yielding debt, and uncertainty created by the COVID-19 pandemic
- Central banks are also a strong source of demand, with volumes having increased steadily over the past decade
2020: 2,046.1t* (investment and central banks)
Jewellery
Historically, gold jewellery has been the strongest source of demand, accounting for around 50% of total demand. In 2020, jewellery demand fell, largely because of curtailed economic activity because of the pandemic. The largest markets are India and China
2020: 1,411.6t* (global demand for use in jewellery)
Medicine and dentistry
- Gold nanoparticles are used in rapid diagnostic testing, which have helped to revolutionise the diagnosis of diseases such as HIV/Aids
- Gold-based drugs are being developed to treat diseases such as rheumatoid arthritis
- Gold nanoparticles deliver anti-cancer drugs directly to tumours
- Gold’s being malleable and non-allergenic makes it ideal for use in dentistry
Technology, aerospace, environment
- Gold wire is widely used in almost all electronic devices that make the internet function – computers, mobile phones, global positioning systems, etc. As an efficient and reliable conductor and connector, it enables the rapid, accurate transmission of data
- In space, layers of gold are used to protect astronauts and equipment from heat and radiation
- Gold nanoparticles are used to improve the efficiency of solar cells and panels
- Environmentally, nanoparticles are used to clean contaminated groundwater by breaking down pollutants
2020: 301.9t* (includes medicine and dentistry)
* Source: World Gold Council