CEO’s review

The year 2009 will be remembered as a year of change. Globally, it was a year in which relationships between business and government were recalibrated, as governments intervened to offset the worst effects of the financial crisis.

In the mining sector, it was the year in which the global commodities boom receded. However, as in the past, gold prices benefited from the uncertain economic circumstances and fears of inflationary pressure. Some of the economies in which AngloGold Ashanti operates are heavily dependent on the resource sector, and the downturn in commodity prices created challenging conditions for these governments. Scarce financial resources had to be extended and many of our host communities were affected as the provision of basic services deteriorated or in some cases collapsed.

Against this backdrop of uncertainty, we focused on developing a resilient business culture which is able to thrive in all market conditions and deliver strong returns on capital employed through the economic cycle. We have designed a people-focused structure where accountabilities are clear and where we have the right person in the right role at the right time. During the year we started to roll out this system in conjunction with a major business process improvement initiative. These two components together create a business philosophy of accountability – ONE – that extends to every corner of the organisation.

In the context of these changes, I want to share with you – our partners, stakeholders and particularly our employees – my views on our sustainability commitment: what sustainability means for us, what we have achieved in 2009 and what our commitments are in 2010 and beyond.

Our sustainability commitment

Commitment begins with accountability. In order to give effect to our commitments in the area of sustainability, I have tasked Thero Setiloane, our executive vice president for business sustainability, with the accountability to design how we achieve our sustainability goals, working through the corporate sustainability team and with each business unit, which is responsible and accountable for implementing the corporate vision.

Thero has a number of critical tasks, in particular he has committed to supporting our business leaders in achieving two objectives which will address key concerns of stakeholders. The delivery of our people and community oriented objectives will enable us to achieve and sustain the ambitious target that we have set ourselves for returns to shareholders – consistently generating returns of above 15%.

The first objective focuses on safety – reinforcing our philosophy of ‘care’. Although significant progress has been made, particularly if we look back over a three-year period, we still have much work to do. In 2009 we lost 16 of our colleagues and experienced over a thousand lost time injuries across the group. We also reported over 400 new cases of silicosis to the Medical Board for Occupational Disease of South Africa and identified 79 new cases of noise induced hearing loss.

The first objective focuses on safety – reinforcing our philosophy of ‘care’. Although significant progress has been particularly if we look back over a three-year period, we still have much work to do. In 2009 we lost 16 of our colleagues experienced over a thousand lost time injuries across the group. We also reported over 400 new cases of silicosis to Medical Board for Occupational Disease of South Africa and identified 79 new cases of noise induced hearing loss.

We cannot continue to operate sustainably with such an unacceptable toll on our people, people who leave their families in trust to work with us each day. Incremental advances in safety performance are not enough; a transformational target and approach is required. Thero has been tasked with designing and supporting the implementation of our strategy to reduce the accident rates by 70% in five years, putting us on the road to operating sustainably through every employee. With the committed support of line management, he is implementing the five elements of our vision for safety transformation in order to make this target a reality. These are:

• providing inspiration through safety leadership
• clarifying individual and collective accountabilities for safety
• establishing a common safety management framework
• developing a knowledge-based approach to safety management
• integrating safety into our business strategies and the way we do work.

The second critical area relates to our efforts in the area of environment and community, where the five-year target of a 60% reduction in all incidents has been set. This is achievable if we plan and maintain our operations optimally and with due concern for our operating environment. It also requires active community engagement and communication. For this reason, we are putting in place a more structured engagement approach wherever we do business.

As with our commitment to safety, leadership, accountability and resources are required to ensure that this objective is achieved. We have undertaken as a management team to ensure that the necessary resources are made available, particularly in areas such as engagement with our stakeholders and social partners, supporting community initiatives, rehabilitation and closure, and pollution prevention.

Partnering for development

In our daily operations, we consume scarce resources in the countries which host us – land, water and energy in particular. In order to maintain a sustainable business footprint, we need to ensure that we put these resources to good use to create wealth for all our stakeholders, including communities, governments, employees and shareholders.

Each of our operations and exploration sites will have an engagement strategy in place as we move forward, with the intention of involving communities in decisions that affect us and them – our area of shared responsibility. Mutually beneficial partnerships are founded on trust and consistent engagement and on our ability to create sufficient value to sustain viable communities after our operations have ceased. We will be putting in place more structured approaches to channel our contributions to these partnerships in 2010, in particular with the introduction of company-wide standards relating to key areas of environmental and community management. We are also working with the ICMM to promote the ‘Mining: Partnerships for Development’ initiative, which is designed to leverage the benefits of mining in developing countries in which the company operates.

Engagement through the mine life cycle

In an industry based on a myriad of risks, we operate with one certainty. Each day we mine a deposit we move one day closer to its depletion and eventual closure. Some of our mines have operated for decades; many operate in remote locations. Our host communities are almost always dramatically and irreversibly changed as a result of our presence.

Understanding this reality, it is our responsibility to ensure that we begin engagement with host communities and governments at the earliest stage possible, often before exploration activity begins. It is only through structured and consistent engagement that we can create the conditions for the benefits of a mining operation to be used by a community to develop, so that when the moment of closure eventually arrives, the community is better off for our presence. We will be looking at ways in which we can improve on this engagement process in 2010, including in the area of government relations.

Our obligation is to maintain this engagement throughout the mine life cycle, managing our operations to ensure that consent is maintained and that harmonious and mutually beneficial relationships are created. It is only through this approach that we will be able to secure and maintain our social licence to operate.

Reporting on our performance

As part of the changes which we are making to our business, we decided in 2009 to adapt our reporting format to ensure that it remains current and in line with best practice. In line with our philosophy of engagement, we need to ensure stakeholders can access the information that matters to them in a format which is clear and useful.

We have started a three-year programme of change to our sustainability reporting. This report – Issues that matter – is the first of this cycle. We have spent time during the year identifying the sustainability issues that matter most – to our stakeholders as well as to the business – and we have used this analysis as the basis for our reporting. In future reporting cycles and in managing sustainability issues in our business, the process of determining priorities will help us define our targets and commitments and the areas in which we need to focus our engagement.

We will continue to report against the Global Reporting Initiative’s G3 guidelines, at an A+ level, and to report on compliance with the sustainable development framework of the International Council on Mining and Metals. We also support the UN Global Compact, the Voluntary Principles on Security and Human Rights and the Extractive Industries Transparency Initiative, and committed to fulfiling the reporting and disclosure commitments that arise from membership of these bodies.

In 2010 I am looking forward to working with a new group of colleagues in achieving our sustainability goals. We have asked six experts in the areas most important to us to give us independent advice on the sustainability issues that we need address in our business, and on the way in which we report on them to our stakeholders.

Such is the complexity of our business that this report cannot be comprehensive. We have focused on the areas of our shared responsibility with stakeholders and have given a frank account of the issues that matter most. We see this report as part a strategy of structured engagement with stakeholders, a dialogue in which we welcome your participation.

Mark Cutifani
Chief executive officer