AngloGold Ashanti plc (AU) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti Decarbonization Strategy. [Operator Instructions]. There will be an opportunity to ask questions later during the conference. [Operator Instructions] Please note that this call is being recorded. I would now like to hand the call over to Stewart Bailey. Please go ahead, sir.

Thanks, Irene. Good day, everyone. Thank you very much for joining us today to walk through our carbon emission reduction strategy, where we've set new targets for -- to achieve carbon reduction by 2030. Alberto will provide a presentation and we'll take questions afterwards. And before we do get going, I would just ask you to look at the safe harbor statement at the front of this presentation, which has some important information regarding forward-looking statements, and I do urge you to look at that. Without any further ado, I'm going to hand over to Alberto to provide the presentation. Alberto?

Thank you, Stewart. So if we go to the next slide. We recognize that as a business we have a responsibility to proactively identify and address current and future climate-related threats. We also recognize that decarbonization is an essential tool to manage our climate transition risks and also to leverage the opportunities presented by climate change. In playing our part to limit club change, we have identified a road map to deliver a 30% net reduction in our emissions by 2030, measured from our 2021 baseline. Indeed, when factoring in our anticipated growth by the end of the decade and the emissions that come with it, we could effectively be reducing our absolute emissions by 46%. We have worked closely with our sites to identify and scope key emission reduction initiatives to help us achieve most of that 30% by the end of the decade. While we are clear that we have an absolute reduction target, we will also more than have our emissions intensity in the process. That is the amount of emissions we generate for each ton of material we move. Before we talk about the cost, it's important to note that the vast majority of these projects are NPV positive, making them additive to the value of our business. In all, we estimate that the reductions we are outlining today will require an investment of approximately $1.1 billion to implement. Importantly, AngloGold will fund about EUR 350 million of that with third parties, including renewable energy providers, making up the balance. Our treasury team will start to work to secure a green funding facility of about $250 million to $300 million in the coming weeks, which will be exclusively used for financing green energy projects. We've also put in place the organizational governance framework and processes to ensure we achieve our targets and closely track the benefits of each initiative. The targets we've outlined today are the next significant chapter of our decarbonization journey. This actually is a journey that started more than 15 years ago with a focus of reducing energy consumption at our carbon-intensive mines in South Africa. We underpin that focus in 2008 with a long-term carbon intensity target to achieve a 30% reduction by 2022. Over the years, several energy initiatives gave us reductions in emissions, including the conversion of our Australia operations to natural gas, and the installation of power saving infrastructure in South Africa. We also built momentum to the closure of 2 carbon-intensive operations and the sale of our coal powered mines in -- or coal-powered mines in South Africa along the way. By the end of last year, our emissions intensity was 47% lower than when we set our targets. Importantly, though, our absolute emissions were down by 69%. Last year, our new climate change strategy was approved by the Board, and a major component of that strategy was the development of a credible detailed decarbonization pathway to net zero. It is important to clarify that the target we have announced today relates to our combined Scope 1 and Scope 2 emissions. Before going further, let's pause for a moment to remind ourselves of the sources of emissions that are relevant to AngloGold Ashanti. At present, our material carbon emissions are Scope 1, which arrived on the direct combustion of fossil fuels, which are used to power our heavy equipment fleet and to produce electricity at our remote sites. Our indirect scope 2 emissions arise from our grid-connected operations, but we are fortunate that these have substantial levels of renewables in their energy mix. We've quantified our scope 3 emissions in detail for the first time in 2021 with about 95% of these value chain emissions coming from just 3 categories. In reducing these indirect emissions, we'll need to collaborate with our major suppliers. As I mentioned, our absolute carbon emissions are down almost 70% since first committing to a carbon intensity reduction target in 2007. We selected 2021 as a baseline to measure future performance as this was the first full year with no South African mining assets in our portfolio. So most accurately reflects our current suite of assets. In recent years, we began tracking the carbon intensity of our energy mix against a basket of our gold mining peers. This essentially looks at our emissions for each gigajoule of energy we consume. It gives a picture of how clean our energy mix is, stripping out any distortions caused by grade, mine type or scale of operations. Reassuringly, we have seen that our overall energy mix is becoming less carbon-intensive relative to the peer group. We will be looking to maintain this relative advantage and successful decarbonization. It's key in this regard. As noted earlier, we have a new climate strategy. Its goal is to ensure the climate resilience of our business, including through the adaptation of our sites and host communities, ensuring they're more resilient in a world where more extreme weather events are becoming more commonplace. Decarbonizing our energy mix is also a major component of this strategy. And although lower emissions are important in themselves, these initiatives also help manage transition risk in a world where sovereign emissions targets are becoming more and more onerous and in capital markets where standards are becoming stricter with each passing month. And finally, we have also uncovered financial opportunities in many of the decarbonization initiatives that we have explored thus far. Our carbon emissions profile grows organically from our existing operations until supplemented by Colombia, Nevada growth projects from 2025. measuring of the 2021 baseline, we were able to reduce our emissions by 30%, which, as we stated before, when considering the projected growth equates to an absolute 46% reduction in emissions by 2030. This chart reflects our consolidated initiatives, the biggest contribution to our reductions in Australia -- is the Australian operation switching to renewables, Brazil, Colombia, Nevada, we will pay to ensure our coal powered fields are from renewables, a process which is fully certified by those local authorities. In Tanzania, the switch to the Tanesco grid at Geita, which is almost complete would fully replace the diesel gensets currently in use and give us a far-less carbon-intensive power source. Renewables are also looking promising at Siguiri and CVSA, where investigations are already underway. In Ghana, we are exploring a 100-megawatt solar farm to feed Obuasi and Iduapriem. And in Brazil and Australia, we are looking at optimizing fleet electrification. Beyond these well-understood initiatives, we will investigate the options to scale up the wind and solar plants in Ghana and Argentina, and expanding the BEVs in Brazil. As with our absolute emissions, our emission intensity has reduced significantly since first coming to an intensity target in 2007. The reduction has largely been due to divestiture of our South African assets, but also through efficiency improvements. We have the potential to more than half our intensity from 32 kilotons of CO2 in 2021 to 14 CO2 by 2030. In summary, we have a healthy pipeline of projects with contributions from all of the business units, which are in varying phases of study. We're off to a strong start with Brazil's Green Energy certification and [Indiscernible] grid connection, followed by the Australia renewable projects, which will start yielding benefits from 2024. We're also making excellent progress advancing a solar solution in Ghana to further lower the emissions out at Obuasi and Iduapriem. And in Guinea at our Siguiri operation. In Nevada and Colombia, our project teams are doing the necessary work to ensure they develop mines of the future by striving to be net zero emitters. The road map to net zero. We have committed to being net zero by 2050, and this is a 3-step process. First, we have established clean sources of energy, which we've outlined today, namely clean grid power, solar and wind farms. Second, as technology development permits, we need to progressively electrify our processes and move our equipment into this cleaner energy source, ensuring that these are operated with what we like to call green electrons. And finally, third, we will create or purchase offsets for those very hard to abate emissions. These steps will help us meet our commitment to achieve net zero by 2050. You can't look at mining companies emissions without considering Scope 3. For the uninitiated Scope 3 emissions are generated in the supply chain from getting inputs to site and from getting our production to market. But that's not all also included, and this is important for all miners or emissions from refining our products to final state. The ICMM is clear. Scope 3 is critical to minimizing our overall impact and gold producers -- and gold producers are extraordinarily well placed in this regard. Not only are our Scope 1 and 2 emissions low relative to our diversified mining peers, but we're simply in a different league on Scope 3. Comparing Gold Miners next to diversified miners that produce other metals and bulk commodities, show the relative importance of Scope 3 to each. Looking at the left hand of the chart, you can barely see the total emissions 4 or 5 of the largest coal producers. Compare that to the issues of 5 of the largest diversified minor scope 3 emissions from the downstream transport processing and use of the products account for about 95% of their total emissions. Remember, all the world's listed gold producers together typically generates roughly 78-odd million tonnes of GHGs in Scope 1, 2 and 3. That's around 4% of the emissions of just these top 5 diversified miners. Despite the relative low materiality of Scope 3 emissions for gold miners, AngloGold Ashanti will nonetheless be taking action to reduce them in partnership with targeted suppliers. So in closing, we have a credible, affordable and effective pathway mapped out to achieve our 30% net reductions in emissions by 2030. This builds on a strong record -- builds on a strong track record of carbon reduction in the past 15 years. we will achieve most of this new target in the next 5 years. We will, in the meantime be looking for ways to reduce that further by 2050 as we deliver on the bigger commitment to achieve net zero. Thank you very much, Stewart?

Thanks, Alberto. Irene, questions?

Thank you, ladies and gentlemen, [Operator Instructions] Just a moment while we queue for questions.

Irene, maybe I can go to the webcast first for a few questions. Alberto, the first question from the webcast is in 2 parts. It says, what inflationary rates have you built into your forecast? The second question is, given the sort of -- that most companies are embarking on decarbonization projects one sort or another, do you foresee there being big supply constraints in the providers of this electricity. I'll stop there for a second.

Okay. Thanks, Stewart. Look, We're actually seeing our inflation for the next year around 6.7% and then coming down. So -- but the way we have dealt with these in this in our forecast is for including a contingency in the scoping of projects that is much lower than the usual. So we had included a contingency of about 35% to deal with whatever price CapEx increases that we may face. I think on the second one, we were already advanced in several projects, and there are issues, but I think we're -- yes, I think the world is getting more and more to deal with them. So again, this is more 2030. So I don't think in the scheme of things, this will be so restrictive.

Perfect. Thanks, Alberto. The next one is -- could you give us a sense what your energy mix is likely to look like by the end of the decade when you reach this target?

Yes. We plan on having about 62% will be between hydro, wind and solar, and the rest will be thermal. As we all know, by 2030, still the world will not have solved the firm energy issue, which is -- hydro is firm, but not within solar. So that's still something that I would expect that this ratio is much higher towards the end of the 2040 where you would imagine that storage would be in a much better situation. But for 2030, we assume these percentage is 62% on renewables.

Thanks very much, Alberto. Irene, I see there are some questions on the call. Maybe I can switch over to you for those.

We have a question from Jared Hoover of RMB Morgan Stanley.

Alberto and team, thanks for the call. Maybe just 2 questions from my side, please. The first with regards to the -- basically the cost savings. So I mean, you've highlighted how much CapEx you're going to spend, and that's going to result in some of the energy costs being a bit cheaper than what it is at some of your operations. Are those cost savings potentially going to be built into your full asset potential program and how you see that evolving to reduce the gap between yourselves and senior peers to about $100 an ounce -- or will any potential cost savings be over and above whatever the FAP envisions? And then my second question, and I understand it's still a bit early in the process, but it looks like there's about $300 million to $350 million of on-balance sheet CapEx to come between now and the end of the decade. Do you have an idea of how you plan to sequence that between now over the next few years? Is it going to be linear? Could it be a bit more lumpy as you push some of these projects up into pre-feeding feasibility status. I'll leave it there for now.

So on the first one, there are separate projects. And this is -- overall, are not probably accept the one in Tanzania. They're not included in the full asset potential. Look, this -- what we have obviously been careful and what we say is that most of them are NPV positive. Actually, they're in the 2 digits in IRR, but this is not why we're doing this, and it will take some time. So let's say, the benefits of this in terms of impact on the balance sheet will be much more towards the end of the 2030 and our full asset potential, we're really trying to have benefits in '24 and '25. So yes, they're tracked separately right now. The average payback or not average, maybe average and good, it's about 4 to 5 years of these projects. So they will have, as I said, more impact towards yes, towards the end of the decade '27 and '28. The balance sheet, we're still working on our net. It will be lumpy, but I think most of them -- we expect, I think, 24% to 26% will be probably some areas of high investment -- years of high investment...