{"id":330,"date":"2024-03-11T07:33:10","date_gmt":"2024-03-11T07:33:10","guid":{"rendered":"https:\/\/reports.anglogoldashanti.com\/23\/ar\/view-from-the-top\/audit-and-risk-committee-chair-statement\/"},"modified":"2024-04-06T10:18:22","modified_gmt":"2024-04-06T10:18:22","slug":"audit-and-risk-committee-chair-statement","status":"publish","type":"post","link":"https:\/\/reports.anglogoldashanti.com\/23\/ar\/view-from-the-top\/audit-and-risk-committee-chair-statement\/","title":{"rendered":"Annual statement by the Compensation and Human Resources Committee Chair"},"content":{"rendered":"\n
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Dear Shareholder<\/strong><\/h3>\n\n\n\n

The past year was transformational for AngloGold Ashanti. In September 2023 we announced the completion of a corporate restructuring which resulted in the creation of AngloGold Ashanti plc, a UK incorporated company which owns all Group assets, has a primary listing on the New York Stock Exchange (NYSE), and secondary listings in South Africa and Ghana.<\/p>\n\n\n\n

It is in this context that the Compensation and Human Resources Committee (\u201cthe Committee\u201d) reviewed its approach to executive remuneration to make sure it is fit for purpose, aligns with market expectations and best practices and supports the strategic priorities of the business and the interests of our shareholders and other stakeholders.<\/p>\n\n\n\n

The restructuring has also led to a change in how we are required to report on executive remuneration. This can be seen in the slight changes to the Annual Remuneration Report (Section 2 of this report), which is in line with UK reporting requirements, and sets out details of remuneration for Directors of AngloGold Ashanti plc. As a UK incorporated company, we are required to seek shareholder approval for a Remuneration Policy at the 2024 AGM (as set out in Section 3 of this remuneration report). This will be subject to a binding resolution. The Remuneration Policy considers disclosures appropriate for a NYSE listed company while also maintaining disclosures applied prior to the corporate redomicile that met South African requirements.<\/p>\n\n\n\n

The Executive Directors continue to be paid in line with the legacy AngloGold Ashanti Limited arrangements until such time as the new Remuneration Policy is approved.<\/p>\n\n\n\n

Performance context<\/strong><\/h4>\n\n\n\n

The year in review was one of profound change for the business, with the successful shift of the corporate domicile to the UK, the company headquarters to Denver, Colorado and the primary listing to the NYSE, while maintaining important secondary listings in South Africa and Ghana. This complex transaction, dealing with regulators, host governments, employees and a host of other stakeholders across multiple jurisdictions, received almost unanimous shareholder support and culminated in a seamless transition in September 2023.<\/p>\n\n\n\n

The new corporate structure places AngloGold Ashanti alongside its highest-rated global gold mining peers in the world\u2019s largest capital market and source of most of the world\u2019s investment in gold mining companies, creating a strong platform for shareholder value creation over the long term. It is important to note that this change was not without disruption, however, as it impacted AngloGold Ashanti\u2019s weighting in certain indices, including the main index for South Africa\u2019s JSE bourse, and likely caused selling as funds that track the index rebalanced their holdings to more closely mirror the benchmark.<\/p>\n\n\n\n

The Company achieved another record safety performance, with its industry-leading total recordable injury frequency rate again coming in well below the average for members of the ICMM. No fatalities were recorded at Company-operated mines for a second consecutive year. This achievement is hard won, and every member of AngloGold Ashanti\u2019s leadership team is at pains to stress the result is only as good as the last injury-free day, ensuring that complacency is guarded against and that a premium is placed on learning from missteps, accidents and near misses.<\/p>\n\n\n\n

Operators were tested throughout the year, with some key factors lowering production volumes in the first nine months. A detailed description of the financial and operating performance can be found in the CFO\u2019s statement<\/a><\/mark><\/em> and Regional review<\/a><\/em><\/mark> in this Annual Report, but some key performance milestones are detailed below.<\/p>\n\n\n\n

There was significant advancement on the Full Asset Potential Programme, with assessments completed at all sites in 2023 (except Obuasi which is still ramping up production). The Programme has started to deliver productivity and cost benefits.<\/p>\n\n\n\n

An enforced suspension of concentrate processing at Cuiab\u00e1, in Brazil, to allow for additional engineering and geotechnical work to be completed during 2023 at the Calcinados tailing storage facility (TSF) to evaluate options for alignment of the TSF with international standards currently considered best practice, forced a complex reorganisation of that operation to allow for the export of concentrate to a third-party processor. It was pleasing to see the lower volumes of the first half rebound in the second, as the site team rallied and exceeded target for the year.<\/p>\n\n\n\n

At Siguiri, in Guinea, a weld fail from a structural enhancement of the tank almost 15 years ago caused the failure of a large CIL tank in the processing plant in May, curbing production for several weeks while repairs were effected. Again, a resilient site team completed the job ahead of schedule and by year-end volumes were back at their normal run-rate.<\/p>\n\n\n\n

Finally, at Obuasi, in Ghana, poor ground conditions in very high-grade areas forced a marked slowdown in mining during the final third of the year, as the management team took the correct decision to prioritise safety over ounces and pivot to a different mining approach. While this change is important to mitigate safety risk in parts of the mine and resulted in a reduction in expected production in 2023 and 2024, the recovery appeared to be on track by the end of the year and the long-term investment case and operating profile for this important mine remain very much intact.<\/p>\n\n\n\n

Despite these significant challenges, the management team delivered production within the guidance range for the year, albeit at the lower end.<\/p>\n\n\n\n

The cost environment remained challenging, with inflation remaining stubborn in most developing markets, despite moderating in developed market jurisdictions. This pressure was compounded by the loss in production explained above, which is always an added weight for a company with a high fixed cost base.<\/p>\n\n\n\n

Nonetheless, the increase year-on-year in total cash costs <\/em>APM<\/mark><\/sup><\/em><\/strong> (adjusted to exclude the C\u00f3rrego do S\u00edtio (CdS) operation that was placed on care and maintenance in August 2023) was contained at 11%, with the final figure of $1,108\/oz also within the adjusted annual guidance range.<\/p>\n\n\n\n

A cornerstone for any mining company is a strong balance sheet. Management was able to maintain low rates of leverage even after self-funding investment for the year, including sustaining and significant growth capital, an intensive exploration drive in Nevada, and the one-off taxes and costs related to the Company\u2019s redomicile. The ratio of adjusted net debt to adjusted EBITDA <\/em>APM<\/mark><\/sup><\/em><\/strong>  remained below the 1.0 times target at year end, helped by strong free cash flow <\/em>APM<\/mark><\/sup><\/em><\/strong> generation in the second half of the year as a 15% increase in production versus the first half coincided with a 10% reduction in cash costs <\/em>APM<\/mark><\/sup><\/em><\/strong> per ounce over the same period and a rise in the gold price.<\/p>\n\n\n\n

The ability to continue filling the project pipeline with viable options for expansion or new projects is fundamental. Once again, AngloGold Ashanti managed to deliver an outcome, where the gold Mineral Reserve increased 2.2Moz pre-depletion to a total gold Mineral Reserve of 28.1Moz at 31 December 2023 and the gold Mineral Resource increased 5.6Moz pre-depletion. The Measured and Indicated Mineral Resource is 59.9Moz and Inferred Mineral Resource is 46.4Moz at 31 December 2023. The highlight was undoubtedly the significant first-time gold Inferred Mineral Resource at the Merlin deposit, in the Expanded Silicon project, of 9.1Moz, thought to be the largest new gold discovery in the US in the past decade.<\/p>\n\n\n\n

This new find takes AngloGold Ashanti\u2019s total Mineral Resource in the Beatty District to a total of 16.6Moz. The opportunity for generating substantial value is significant, particularly in what is one of the most coveted mining jurisdictions globally.<\/p>\n\n\n\n

The Board of Directors and management team are mindful that we cannot afford to conduct business as usual as the evidence mounts of a changing climate. After almost two decades of work to continually reduce greenhouse gas emissions (GHG) and reduce the emissions-intensity of our mines, we have set clear and challenging targets for a further 30% reduction in our Scope 1 and 2 GHG output by 2030, measured off a 2021 baseline. Two major steps to achieve that goal were taken during the year \u2013 the first being the transition from thermal generators to cleaner grid power at Geita, which was near complete by year-end, and will be commissioned by mid-year 2024. The second is the move to cut Tropicana\u2019s emissions by half through starting construction of a wind and solar farm in 2023 which will introduce renewable electricity into the energy mix which is well underway as we enter 2024. In addition to these two projects, we also benefit from being connected into a hydro-power grid in Brazil and received recognition for sourcing 100% green power.<\/p>\n\n\n\n

2023 pay outcomes<\/strong><\/h4>\n\n\n\n

For the 2023 year, pay levels for Executive Directors were considered in the general context of both market and economic conditions as well as the level of increases made across the Company and overall affordability. No salary increase was awarded to Alberto Calderon in 2022 and it was determined that a 3.5% increase be awarded in 2023, to align with executive market movements and internal pay practices.<\/p>\n\n\n\n

Gillian Doran commenced employment in January 2023.<\/p>\n\n\n\n

Neither Executive Director received any increases to their compensation as a result of the restructuring.<\/p>\n\n\n\n

As noted above, while significant progress was made during 2023, notably the seamless transition to the new corporate structure and delivery of outstanding safety performance, the business also faced a number of operational challenges.  While performance improved during the second half of the year, the overall results including production and total cash costs <\/em>APM<\/mark><\/sup><\/em><\/strong> were within guidance (adjusted to exclude the CdS operation that was placed on care and maintenance in August 2023). This performance was reflected in outcomes under the Deferred Share Plan (DSP) which were below the on-target level at 75.20%, and lower than the prior year at 94.86%. Further details of the incentive outcomes for the year can be found in the Director’s remuneration report<\/em><\/a>.<\/p>\n\n\n\n

2024 remuneration policy<\/strong><\/h4>\n\n\n\n

Since 2018, AngloGold Ashanti Limited has delivered variable pay through a single incentive plan \u2013 the Deferred Share Plan (\u201cDSP\u201d). This plan was carried over to AngloGold Ashanti plc with the restructuring. Under this structure, performance is assessed based on a single scorecard, which determines a cash award and\/or a deferred cash or share award each year. <\/p>\n\n\n\n

Although this structure has had strong shareholder support in recent years, many of our major investors have stated a preference for a more conventional incentive structure consisting of separate short-term and long-term incentive plans, more in line with our peer group.<\/p>\n\n\n\n

While the current single incentive structure has the benefit of simplicity, it has its disadvantages. Firstly, the structure lacks a material weighting on forward-looking, long-term targets, which limits our ability to incentivise performance linked to our long-term strategic ambitions. Secondly, the structure we currently employ can limit our ability to compete for talent, as the structure is unfamiliar to potential employees. Our analysis shows that key competitors use a more conventional structure with separate annual bonus and long-term incentives.<\/p>\n\n\n\n

Therefore, from 2024, we are proposing to move to a more standard approach, comprising two separate plans:<\/p>\n\n\n\n