AngloGold Ashanti: the dawning of a new
age
Anita Gihwala
Anita Gihwala is based at 1. Introduction
the Graduate School of
Business, University of
It was late Thursday evening when Drew Cunningham got the news. As the newly appointed
Cape Town, Cape Town, Senior Vice President for Business Improvement and Operations Support[1] for AngloGold
South Africa. Ashanti’s continental Africa region[2], Drew would be responsible for ensuring the region not
only implemented the new business improvement initiative called Project One[3] but that its
systems, processes and procedures would become a new way of working for the region
(Figure 1). He knew immediately it would be no easy task. Continental Africa was the one
region where the organisation had not seen any real progress or improvement since the
launch of Project One more than two years ago. Drew was all too aware that unless the new
systems, processes and procedures became embedded within the organisation, the longer-
term success of Project One and ultimately the sustainability of the organisation, could be
called into question (Exhibits 1-6).
The author wishes to
acknowledge Dr Linda Ronnie,
senior lecturer in organisational 2. The mining industry
behaviour and people
management at the University 2.1 Mining in Africa
of Cape Town’s Graduate
School of Business. The author
thanks Dr Ronnie for her time,
As the demand for commodities continues to exceed supply, mining companies the world
disciplined approach and over are struggling to increase production sufficiently to keep pace with the boom. New
sense of humour throughout the
research and writing process.
markets must be found and this begs the question: does Africa, the most mineral rich
Her friendly yet frank advice continent on earth, hold the answer?[4]
was invaluable, as was her
ability to balance enthusiasm South Africa, Ghana, Zimbabwe, Tanzania, Zambia and the DRC dominate the African
with encouragement in the right
doses.
mining landscape. Among other countries, Angola, Sierra Leone, Namibia, Zambia and
Botswana rely heavily on mining as a major earner of foreign currency. Africa produces more
This case is intended to be
used as the basis for class than 60 metal and mineral products and is a major producer of several of the world’s most
discussion rather than to important minerals and metals including gold, diamonds, uranium, manganese, chromium,
illustrate either effective or
ineffective handling of a nickel, bauxite and cobalt. Although underexplored, Africa hosts about 30 per cent of the
management or administrative planet’s mineral reserves, including 40 per cent gold, 60 per cent cobalt and 90 per cent of
situation. The case was
compiled from interviews and
the world’s platinum-group metals (PGM) reserves. This makes the continent a true strategic
published sources. In some producer of precious metals[5].
cases names have been
changed but no data have been
disguised. 2.2 The South African mining industry
South Africa is a world leader in mining, and mining in South Africa has been the main driving
Disclaimer. This case is written
solely for educational purposes force behind the history and development of the South African economy. The country is
and is not intended to represent well-known for its abundance of mineral resources, and accounts for a significant proportion
successful or unsuccessful
managerial decision making. of world production and reserves[6]. South Africa is the world’s biggest producer of platinum
The author/s may have and one of the chief producers of gold, diamonds, base metals and coal. Almost 50 per cent
disguised names; financial and
other recognizable information
of the world’s gold reserves can be found in South Africa. In addition to the country’s mineral
to protect confidentiality. wealth, its strengths include high levels of technical and production expertise, and
DOI 10.1108/20450621211289476 VOL. 2 NO. 8 2012, pp. 1-33, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
, Figure 1
Source: Extrapolated by the researcher from data provided by the company
comprehensive research and development skills[6]. South African mining companies are
key players in the global mining industry.
Although the South African gold mining industry is frequently criticised for its poor safety
record and high number of fatalities[6], conditions on most South African mines are very similar
to those in the rest of the world. A reason for the high number of fatalities is that South Africa’s
gold mines are much deeper and conditions are both more difficult and dangerous than on
shallower mines elsewhere in the world. In South Africa, the rate at which the temperature goes
up with depth is as low as 98C per kilometre (The world average is about 258C per kilometre)[6].
This phenomenon, combined with narrow inclined reefs in hard rock, makes it possible to mine
to depths unattainable elsewhere in the world[6]. The depth and narrowness of many of South
Africa’s gold mines make mechanisation difficult. In deeper mines, refrigerated air, though
energy intensive, is often necessary to keep conditions tolerable[6]. Against this background,
safety improvement is a top priority at many South African mines with sweeping changes
having been introduced to reduce the number of fatalities countrywide.
3. The Anglo American Corporation
In 1917, Sir Ernest Oppenheimer and J.P. Morgan founded a gold mining company and,
based on each of their heritages, named it Anglo American Corporation. The success of the
company’s mines located as far afield as Zambia and Canada enabled the company to
become one of the world’s largest gold-mining groups by the middle of the twentieth century.
On May 24, 1999, Anglo American Corporation merged with Minorco to form Anglo
American plc. The merged entity held its primary listing on the London Stock Exchange and
a secondary listing on the Johannesburg Stock Exchange. The merged entity also spun off
its gold mining operations into a separate AngloGold Corporation. Since the merger, Anglo
American plc has grown into a diversified, global producer of diamonds, copper, nickel, iron
ore and metallurgical and thermal coal and is the world’s largest producer of platinum. The
company has operations in Africa, Australasia, North America and South America[7].
j j
PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012
, In 2004, the separate AngloGold Corporation that housed the gold mining operations of
Anglo American plc merged with Ashanti Goldfields Corporation, based in Ghana, to form
AngloGold Ashanti Limited[8]. Headquartered in Johannesburg, South Africa, AngloGold
Ashanti is now a global gold producer with more than 20 operations on four continents and
several exploration programmes in both the established and new gold producing regions of
the world. The company employs over 62,000 people[9].
During October 2005, Anglo American plc announced that it intended to provide AngloGold
Ashanti with greater flexibility to pursue its own strategy by reducing Anglo American’s
shareholding in the company. Anglo American plc still intended to remain a significant
shareholder in the medium-term. This announcement was welcomed by AngloGold Ashanti.
Three years later, during 2008, Anglo American plc reduced its stake in AngloGold Ashanti
to 16.6 per cent and in 2009, Anglo American plc exited the company completely[10].
Given the growth in South Africa’s secondary and tertiary economies, the comparative
contribution of mining to the gross domestic product of the country has been in decline over
the past 20 years[11]. Nonetheless, the mining sector continues to contribute almost one-
third of the market capitalisation of the JSE, and remains a magnet for foreign investment in
the country. The industry is in a constant state of flux, having frequently to adapt to changing
local and international conditions yet still make important contributions to economic activity,
job creation and foreign exchange earnings[12]. Against this background, AngloGold
Ashanti recognises the need to redefine its role in the industry and the manner in which it
intends to compete in the global mining industry.
4. A change in leadership
In late 2007, Mark Cutifani replaced Bobby Godsell as Chief Executive Officer of AngloGold
Ashanti and was appointed as director of the company on September 17, 2007 and as Chief
Executive Officer on October 1 that year.
At the organisation’s announcement that Godsell would be retiring from the company and
the board with effect from September 30, 2007 and that he would be replaced by Mark
Cutifani, Bobby Godsell remarked that:
It is the right time to change leaders. In Mark Cutifani, a mining engineer with a wide and
impressive track record of both operating and executive experience across a range of minerals,
including gold, and on several continents, we have a new leader who brings exactly the qualities
and experience needed for AngloGold Ashanti’s new chapter[13].
At the time that Mark Cutifani joined AngloGold Ashanti, the company was in dire need of a
new strategic direction. Return on capital was decreasing, operations were delivering well
below their potential, costs were increasing and the organisation had the largest gold hedge
book. In total12 million ounces of gold had been sold for between $350 and $400 dollars an
ounce at a time when the gold price was soaring[14]. The company was losing money fast.
Cutifani recognised that if the company was to survive, drastic action would need to be
taken. Change was necessary. The company simply could not move forward on the basis
that it had been to date. It was against this background that AngloGold Ashanti, under the
leadership of Mark Cutifani, launched the business improvement project known as Project
One[15].
5. Project One
AngloGold Ashanti’s change initiative was conceived through a series of conversations
between Cutifani and his executive team over the first 12 months after he joined the
organisation. According to one of the senior executives:
We established the imperative to change. We had a lot of conversations around safety and other
performance metrics, trying to demonstrate why we could not keep doing what we had been
doing or we weren’t going to have a business. The executive team talked about what we were
doing, why we could not keep doing what we had been doing and what we had to do to change
our future. So that became the catalyst.
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