KELVIN DUSHNISKY: SA has a rich vein of expertise and remains AngloGold Ashanti’s nerve centre
On Wednesday this week, following a rigorous nine-month bidding process, AngloGold Ashanti announced the sale of our remaining assets in SA to Harmony Gold. The transaction remains subject to a number of standard regulatory and other conditions and is expected to close later this year. Once complete, our company will have no production from SA for the first time in its long history.
The decision to embark on the sales process was not an easy one. These assets have been an integral part of our company’s DNA and an incubator and training ground for some of our most skilled engineers, geologists, metallurgists and accountants. Mponeng, the world’s deepest mine, has been part of an increasingly international business for as long as AngloGold Ashanti has been independent of its former parent, Anglo American, since 1998. On any visit to the mine it’s hard not to be struck by the extremely high quality of the mine’s management team and operators, the impeccable quality of the infrastructure and the total dedication to safety that every employee displays.
Although ultra-deep gold mining has in recent years become a niche business in a global industry that prizes shallower gold-mining operations, this mine — with its deepest workings almost 4km below the surface — is a showcase for SA enterprise and ingenuity. It’s also an excellent example of SA’s geological wealth; after decades of mining, Mponeng still has 8.5-million ounces of reserves.
Even with all of those unequivocally positive attributes, we had a difficult call to make. In our hands, with our plans, the investment needed to mine those ounces below our workings would generate a financial return that was simply not as attractive as the returns offered by project opportunities elsewhere in our global portfolio. And without that investment from us the mine would likely be closed well before the end of this decade.
We have finite capital to invest and need to make these trade-off decisions all the time; what assets will stay in our portfolio and be allocated capital, what assets will be closed, and what assets might fare better in the hands of another operator, with a different approach. It remains our view that in the case of our SA assets the interests of the country will be best served by allowing another company the opportunity to extend the life of these mines, so preserving precious jobs, income and tax revenues for a longer period. It’s not entirely altruistic though, as through the sale we will be left with a simpler, more focused portfolio of gold mines and projects. That’s congruent with our strategy which emphasises focus and strict allocation of capital.
At the outset of the sales process we undertook publicly — and in private discussions with government regulators, our employees, their representatives in organised labour and our shareholders — to sell only to an established company with the financial strength and operational talent to take these assets forward responsibly. We believe Harmony Gold fits that bill, and its intent is clearly to make a success of this important operation over the long term, for the benefit of its shareholders, employees and a host of other stakeholders who depend on gold mining for their livelihoods.
Many commentators could not resist the temptation to view our decision — driven by the realities of capital allocation — as a vote of no confidence in SA. That is simply incorrect.
Like many other countries across the world, in developed and emerging markets, this country has challenges, notably in its electricity sector. While few would dispute that, it is encouraging to see real steps being taken to address these, including the recent decision to allow companies to generate their own power. As a global miner we encounter challenges in many jurisdictions from time to time, and we’ve made a business out of managing them well over decades, in a variety of circumstances.
We should not lose sight of the incredible endowment SA has in so many areas: in its human capital, in its financial and regulatory infrastructure, in its geographic position, its geology, its universities and in the array of world-class industries that are essential to servicing a modern mining industry. AngloGold Ashanti has tapped into that rich vein of expertise to operate and grow one of the world’s largest gold companies over the past 22 years. SA is well placed to continue leveraging these strengths.
While we will no longer have production from SA once Harmony assumes control of our portfolio later this year, the centre of excellence we’ve grown and nurtured for more than two decades at our Johannesburg office will continue to be the operational nerve centre for our mines across the continent, and the world.
• Dushnisky is AngloGold Ashanti CEO.