Environment

In December 2007, AngloGold Ashanti CEO Mark Cutifani set a short - to medium-term target for the group of reducing energy consumption by 15% per ounce of gold produced and a medium - to longer-term target of reducing greenhouse gas emissions (GHGs) by 30% per ounce of gold produced. Cutifani was emphatic that the group, as a notable GHG emitter, needed to address climate change holistically, admitting that these were ‘stretch’ targets and encouraging the group to start looking at non-traditional means of attacking the problem. See case study in the Report to Society 2007, AngloGold Ashanti and climate change.

STRATEGIC FOCUS

Guided by an internal position paper to look at the way forward for the group, including key risks and opportunities, AngloGold Ashanti embarked on a three-part study in September 2008 to develop a group-wide response to climate change.

The main areas of work undertaken are discussed below.

• A GHG assessment to determine the carbon footprint of all AngloGold Ashanti operations. The benchmark year for the assessment was set as 2007. Details of the group’s GHG footprint and performance for the year may be found in the section on Environment on page 186 of this report. AngloGold Ashanti has also, for the past two years, participated in the Carbon Disclosure Project (CDP) and the group’s response to CDP6, the most recent survey, may be found at www.cdproject.net.
• A comprehensive risk assessment to determine the level of risk to which the company is exposed as a result of climate change. Various risk categories, such as financial and investment risk, risk owing to government policies and legislation, and physical risk, including local community vulnerabilities (see discussion on current adaption in the community section) were considered. Key points that have been addressed include proactively assessing these risks and how being proactive could be used to competitive advantage. Also considered was the fact that, while regulatory requirements will become stricter in the near future, there will be differences in regulatory requirements across jurisdictions, which may in turn present both opportunities and difficulties.
• The identification of potential climate change opportunities that could expand on the group’s current energy savings activities and energy efficiency projects so as to reduce the company’s dependence on fossil fuels; further, to identify opportunities where GHG emissions can be reduced to minimise the group’s carbon footprint; and to identify where carbon credits can be realised and potentially traded in order to offset the costs of the above initiatives and to contribute to the company’s bottom line.

The project, led by Camco, a leading climate change consulting company, was not just aimed at understanding the group’s footprint and developing action plans to effect significant reductions, but to develop a business case for climate change in terms of the group’s key business drivers.

Says CEO, Mark Cutifani, “The reduction of GHG emissions requires an innovative and integrated solution. Once we understand what the business case is for climate change, we can ensure that – through effective management of climate change parameters, adaptation of our operations and addressing our sustainable development imperatives – we can extract opportunities from this challenge to make a positive contribution to our business objectives and add to the triple bottom line.”

CDM OPPORTUNITIES

Given the group’s focus on delivering value, the approach taken was that the process should seek to identify multiple and highly probable Clean Development Mechanism (CDM) projects. (See box below on the Clean Development Mechanism.)

At the outset Camco embarked on a fact-finding process, both in respect of the actual quantification of GHG emissions, but also in developing an understanding of the business and the unique opportunities presented by the different operations. Camco undertook site visits to each of the group’s operations and some of the exploration sites. Importantly, both the availability of potential methodologies and the question of additionality was addressed, although detailed cost analyses still need to be undertaken.

PUTTING CARBON IN CONTEXT

While some of the countries in which AngloGold Ashanti operates currently have limited climate change related legislation in place, more robust national carbon taxes and/or cap-and-trade regimes are being considered in Australia, South Africa and the United States. Of these, Australia is the most advanced, where the government has announced its intention to introduce an emissions trading scheme by 2010. In Brazil, despite the absence of formal regulations concerning GHG emissions, state environmental agencies are requiring companies to develop an emission budget. This initiative signals an intention to change the requirements for environmental licences.

A particular challenge to mining companies wishing to achieve emissions reductions is that the orebodies tend to become less and less accessible as mining proceeds, and lower grades require more energy per unit of metal to extract. Longer haul roads in open-pit mines, and increased lifting distances and more distant stopes in underground mines are virtually unavoidable. This results in increased consumption of electricity and fuels as mining proceeds, and a corresponding increase in emissions. In addition, orebodies differ significantly from site to site – in terms of depth, geology and geochemistry, and the required mining method – resulting in emission reduction strategies typically being effected on a site-by-site basis. These differences also complicate benchmarking one site against another.

For some years, a critical company focus has been on achieving improved energy efficiency. As the company is a significant consumer of electricity, and as South Africa’s electricity supply (where the group measures its highest consumption) is very carbon-intensive, being derived largely from the combustion of coal, reductions in energy consumption have a significant impact on emissions.

AngloGold Ashanti is a signatory to the 2005 South African Energy Efficiency Accord, which committed the company to reducing energy consumption by 12% by 2015. This reduction was actually achieved by the company by 2007. The energy crisis in South Africa in January 2008 added further impetus to the drive to reduce electricity consumption, with the company setting itself an additional target of reducing electricity consumption in South Africa by a further 4.5% by the end of 2008. See case study: AngloGold Ashanti’s response to the power crisis.

ASSESSING THE OPPORTUNITIES

In all, the project carried out by Camco identified more than 100 potential CDM opportunities, many of them small in scale but with the potential to be bundled together. The initial focus was on high-return opportunities that could be realised most quickly. Three primary focus areas were identified:

• opportunities for reducing electricity demand and consumption;
• opportunities for reducing fossil fuel consumption by static and mobile equipment; and
• opportunities to use alternative energy sources.

A workshop, led by Camco and involving key AngloGold Ashanti personnel, was undertaken in January 2009 to evaluate opportunities within these areas.

Opportunities for reducing electricity demand and consumption

The rationale underlying this thrust is that AngloGold Ashanti operates in three of the world’s most energy intensive countries (on a per capita basis), namely South Africa, the United States and Australia. Reductions in the consumption of electricity will not only save costs but will also dramatically reduce indirect carbon emissions.

As part of the review process, the group identified and prioritised opportunities for reducing electricity demand and consumption, looking at factors such as practicality, the capital investment required, the potential for operational cost savings and GHG reductions. Broad areas under investigation included pumping, underground ventilation, process plant operations, high efficiency motors and the use of compressed air.

Opportunities for reducing fossil fuel consumption by static and mobile equipment

The rationale underlying this area of work is that a reduction in the consumption of fossil fuels will reduce directly the amount of GHGs emitted to the atmosphere. In addition, this will also reduce operating costs significantly. Particular areas of attention here were electricity generation, dewatering pumps, ore conveying and mine design.

In identifying and prioritising opportunities that will reduce overall fossil fuel consumption, the group looked at the relative importance of turning separate investment opportunities into executable projects, with particular reference to payback periods and capital investment limits. Also considered were best practice technologies across the group, and how these could be extended to other operations.

Opportunities to use alternative energy sources

Lastly, given AngloGold Ashanti’s targets for GHG reductions, alternative sources of energy supply will need to be considered as much of the group’s emissions are indirect emissions from energy consumption. Some of the potential projects considered were:

• wind farms in Argentina and Tanzania;
• shaft water column turbine electricity generation in underground mines;
• biomass electricity generation from large tracts of land and TFSs under management in South Africa and Namibia;
• biofuels in Namibia, Brazil, Argentina, Ghana, Guinea, Tanzania, Colombia and the DRC;
• hydro-electricity generation in Colombia, Brazil, Tanzania and Vaal River in South Africa;
• solar thermal and solar photovoltaic, in South Africa, Namibia and Australia; and
• heat capture in South America.

Other areas

Other areas also considered include:

• reducing emissions by reducing transportation emissions;
• the potential for carbon offset projects; and
• improving the functioning of buildings.

THE WAY FORWARD

The GHG baseline study, together with the development of a customised carbon calculator, will be an invaluable tool in both management and reporting in the years ahead. The risks considered and identified through the process are being incorporated within the group’s risk management programme.

In respect of identifying climate change project opportunities, the work has only really just begun. High potential opportunities will be studied in greater detail, following the company project approval process. Clearly, carbon trading will be factored into the calculations.

Concludes Cutifani, “I believe we need to take our responsibilities as a global citizen very seriously. Mining responsibly and reducing our carbon footprint is consistent with improving efficiencies, so I do not believe we have to compromise our business objectives. The key is to develop a well thought-out strategy, plan to execute with precision and deliver on our potential.”