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AngloGold Ashanti’s (AU) CEO Alberto Calderon on Full Year 2021 Results – Earnings Call

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AngloGold Ashanti Limited (NYSE:AU) Full Year 2021 Earnings Conference Call February 22, 2022 7:30 AM ET

Company Participants

Stewart Bailey – Chief Sustainability & Corporate Affairs Officer

Alberto Calderon – Chief Executive Officer and Executive Director

Christine Ramon – Chief Financial Officer and Executive Director

Marcelo Godoy – Chief Technology Officer

Conference Call Participants

Jared Hoover – RMB Morgan Stanley

Dominic OKane – JPMorgan

Adrian Hammond – SPG Securities

Patrick Mann – Bank of America

Leroy Mnguni – HSBC

Operator

Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti Full Year 2021 Results. All participants are currently in listen-only mode, and there will be an opportunity to ask questions later during the conference. [Operator Instructions] Please also note that this event is being recorded.

I would now like to turn the conference over to Mr. Stewart Bailey. Please go ahead, sir.

Stewart Bailey

Great. Thanks very much, Chris, and welcome everybody to our full year 2021 results call. We’ve got the expert team present, Alberto and Christine will run you through the presentation and we’ll take questions immediately after. I’d ask you all, before we start the presentation, just to look at the Safe Harbor statement, which is in the back. It’s got important information concerning forward-looking statements and I’d ask you to consult it when you have a minute. Alberto?

Alberto Calderon

Thank you, Stewart. Good day everyone. We ended the year with our all injury frequency rate at 2.13 injuries per million hours worked, which remains well below the ICMM member average. It is also worth noting that injury severity continues to decline. We did have two fatalities in the first half of the year, too many is always unacceptable and we are working hard on our major hazards to minimize the probability that those events happen again.

We’re making progress, as I said, on our revitalizing the safety strategy, which is focused on the control needed to eliminate major hazards that – those that create significant harm or death. What that means is that each person on every site knows by heart the three or four major hazards are most likely to cause fatalities and what is needed to prevent them. This is crucially eliminating more accidents and especially fatalities from our sites. Our emphasis on COVID-19 remains on safely ensuring business continuity. We’re also working with our host governments and communities to provide healthcare support, and other assistance in areas that are feeling strained from the pandemic. About 80% of the workforce was fully vaccinated by the end of the year. This excludes booster shots. These higher vaccination levels will be a significant plus for our employees and our business.

We published our inaugural Climate Change Report in December aligned with TCFD recommendations of the Task Force on Climate-Related Financial Disclosures. The report highlights the way we’re being proactive and transparent in mitigating current and future climate risks and the measures we’re taking to strengthen the climate resilience of our business, our value chain partners, host communities and the environment in which we operate. We also join our peers in the ICMM by committing to a target of net zero Scope 1 and 2 emissions by 2050 and to accelerate action on Scope 3 emissions.

Soon some may remember that we set our first decarbonization targets in 2008 for a 30% reduction in emissions intensity by 2022. We reached the goal four years early. In fact, we ended last year with emissions intensity at full 47% lower. The picture and absolute emissions is even better close to 70% down from the base set in 2007. These reductions are due to changes in our asset mix as well as from energy efficiency and fuel switching projects, but we know there is more to do. Watch the space for our 2030 targets, which were in the advanced stages of development, I hope to release this in the coming months.

We’re pleased to see a continuation of our operating parameters continue to stabilize, especially the 12% half and half gain from our operations excluding Obuasi. It’s encouraging to see the improvement underpinned by strong performances across most of our assets, which was driven by underground grades improving 19% half and half. We achieved our revised production and capital guidance and cost guidance was achieved when adjusting for the impacts of COVID-19. Reinvestments in our bigger assets, Geita, Tropicana and Iduapriem have tracked well and remain on schedule, but there is a huge amount to do to close the gap between this performance and what each asset should be.

Our sites are better resource now to deliver on their plans. We continue to scrub our operating and capital budgets and just last week we launched our full asset potential process at Sunrise. While we take time to get to where we want to be, you should start to see an improving trend and we have no time to waste. Cumulative inflation for the current year-to-date is estimated to be around 8% with increases across most categories. While there are encouraging signs in the evolution of the pandemic, it impacted production by around 47,000 ounces last year and all-in sustaining cost by $34 an ounce.

The absolute rise in AS, all-in sustaining costs last year was driven mainly by the 57% increase in sustaining CapEx. Despite the scale of the investment program and impact of COVID and the Obuasi suspension, we still generated $104 million of cash flow. That means are balancing a solid position with gearing still very low and liquidity strong. Our final dividend of US$0.14 takes the payout for the full year for $0.20. I’m also happy to report that Obuasi has successfully resumed underground mining and we have concluded the Corbis transaction. Just probably to clarify the cumulative inflation to 2021 was 5%, we expect an 8% inflation in 2022.

Key metrics. Here is a snapshot of some of the key operating and financial metrics. I don’t intend on going through in detail but let me draw your attention to some key points. Let’s start with capital, which was almost 50% as we push ahead with our reinvestment strategy and the ongoing compliance with TSF regulations in Brazil. We will also continue to spend at Obuasi Phase 3 without the benefit of any meaningful production. Exploration was also sharply higher consistent with the aim of improving our ore bodies, which I will cover later in more detail. You’ll see the impact of the increased investments in our cost and cash flows, which were also impacted by the lower production and lower price.

The African overview. Kibali continues to be a steady performer with production flat on year. We also saw depletion more than replaced with a marginal increase in ore reserve. Iduapriem’s production was lower as expected as we cut – as we strip Cut 7 ahead of accessing higher block – higher grade Block 7 and 8 later this year. Higher all-in sustaining costs reflect near-term investment in waste stripping and on new TSF. Exploration was a highlight adding about 900,000 ounces of new ore reserve pre-depletion. Siguiri showed a mark improvement, a combination of better grades and higher throughput as we ramp up the processing plant, i.e., was better year-on-year and we expect further improvement as we ramp up delivery of oxide over plum Rock 2. [Indiscernible] production was lower for the mine plan as we continue to develop two new mines on the property at Nyamulilima, and Geita Hill East.

I’m encouraged that development of the open pit is ahead of schedule. We see mine ore increasing to this year, accounting for roughly 50% of gold production in 2022. Geita has another successful year on the exploration – had another successful year on the exploration project adding 800,000 ounces before depletion with strong additions in Nyamulilima and Geita Hill East. In fact, this is the fourth consecutive year our reserve has grown net of…

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