Chief executive, Cynthia Carroll, was formerly president and chief executive officer of Alcan Primary Metal, the largest division of the Canadian aluminium producer. Carroll holds an MBA from Harvard and an MSc in Geology (Kansas). She is strongly committed to improving safety in the workplace and has a track record of working with communities in addressing sustainable development challenges.

The Board is chaired by Sir Mark Moody-Stuart. Tony Trahar, who has been chief executive since 2000, retires at the end of February 2007. He will be succeeded by Cynthia Carroll, previously president of Alcan Primary Metal. The balance on the Board between executive and non-executive members meets the norms of the Combined Code. The Board sub-committees are chaired by non-executive directors. The Board met nine times, and the Safety and Sustainable Development (S&SD) Committee met five times. The chief executives of business units and the heads of functions participate in a Sustainable Development Council which oversees strategy, targets and resource allocation.

An integrated risk management system, which includes sustainable development issues, is in use to identify and manage key risk areas.

Whistle-blowing and compliance

The Group uses an independently-run speakup facility in 45 countries, in 27 languages. This enables employees and external stakeholders to report breaches of our business principles. During 2006 181 alerts were received. Two-thirds of these have already been investigated and closed (247 alerts in 2005). Disciplinary action was taken in 11 cases and in seven cases controls will be improved. In comparison with 2005, fewer alerts were related to safety or health, or appeared to have been submitted with malicious intent. Human resource-type issues, such as allegations of inappropriate appointments and discrimination, increased to 39% of total alerts (25% in 2005). The proportion of supplier-related alerts, which include issues such as conflict of interest and fraud, also increased from 11% in 2005 to 23% of total alerts in 2006.

We suspended our speakup service in France and Germany following rulings on employment and privacy law obtained by other companies. We hope to resume the service in 2007.

In our managed operations, more than 540 people, including 27 managers, were dismissed or resigned following breaches of the business principles (874 dismissals, including 22 managers, in 2005). These include conduct likely to bring the company into disrepute, those involving fraud, corruption, other acts of dishonesty, discrimination, harassment, violence or unsafe acts. An additional 1,127 employees received lesser disciplinary sanctions. We terminated the contracts of 175 suppliers and contracting companies or removed them from lists of approved suppliers for breaches of our standards.

We cannot be certain of the reason for the scale of the increase, from 10 and 15 in previous years, but it seems likely to flow from improved surveillance and monitoring of supplier and contractor performance.

Political donations

In line with our policy, no political donations were made during 2006.

Corruption and transparency

We are committed to fighting corruption and are aware, through the letters of assurance from executives on our business principles, that in one country management successfully resisted pressure to give bribes to public officials. Bribery and fraud within the private sector are also causes for concern.

The Extractive Industries Transparency Initiative (EITI) makes it easier to expose corrupt use of revenues by government officials. It provides an opportunity for mining companies to explain the contribution which they make to host economies and helps to build the institutions and capacities which hold governments accountable for their use of revenues from extractive projects which are there for a limited time. Anglo American was one of the first mining companies to commit to the process.

The EITI has still to prove itself, but over 20 countries have declared their intention to implement the initiative. We represented the mining sector on the International Advisory Group which produced recommendations that were ratified in Oslo in October 2006. Agreement was reached on a framework for validating implementation by countries and companies. There was progress on extending transparency to the flow of revenues between the national and regional levels and initiating moves to secure the endorsement of the UN General Assembly. Anglo American now serves on the EITI Board.

We are currently involved only in country-level implementation in one country, Peru, but have voluntarily declared our payments to governments for a number of years and regularly promote wider participation in the EITI.

Government relations

Governments are one of our key stakeholders. They set the regulatory framework and it is, therefore, important that we maintain a regular dialogue. In the interest of trust and transparency, our important interactions with governments in 2006 are summarised here.

Issues of concern

Higher commodity prices have also increased the incentives for artisanal and illegal mining and for the theft of copper wiring from our operations. These, together with the security responses they require, can heighten tensions. Our associate companies, De Beers, through the Diamonds for Development Initiative, and AngloGold Ashanti were both involved in initiatives during 2006 to create more constructive relations with small-scale miners and address the poor safety and environmental practices associated with such mining.

Tension over resources

Anglo Platinum experienced several incidents in 2006 which highlighted tensions around access to land and resources and the relative status of property rights which resulted in police presence and, in one instance, armed intervention.

In June 2006, 100 members of the Banareng tribe from a village adjacent to the Modikwa platinum mine (a 50%, independently managed joint venture) in the Limpopo province in South Africa, were involved in a confrontation with police after they illegally assembled at a drilling site and allegedly intimidated contractors. It is alleged that police fired shots during the incident. As the crowd dispersed, five people were slightly injured. Four community leaders were arrested but were released the following day.

In another ongoing dispute related to Anglo Platinum’s R4,6 billion ($679 million) expansion of the Potgietersrust Platinum Mine (PPRust), a R613 million ($91 million) relocation of the Ga-Puka and Ga-Sekhaolelo communities has been challenged. Richard Spoor, a lawyer acting on behalf of some members of the two communities, has been quoted as saying: “This is an application in terms of the Protection of Informal Land Rights Act, which determines that such land rights cannot be sold without proper permission or proper compensation.”

Anglo Platinum undertook extensive engagement prior to planning the relocation and believes it has adhered to current international norms.

Anglo Platinum is also spending R412 million ($61 million)
on more than doubling Polokwane’s water storage capacity to ensure that the city will be able to supply waste water for use by PPRust. Water shortage is the greatest physical constraint on mining platinum in the Mokopane district. Only waste water will be used for the mining operation. The relocation and the water project are two key aspects of Anglo Platinum’s programme to enlarge PPRust from its present production capacity of 200,000 ounces of platinum a year to 435,000 ounces.

Spoor is being sued for libel by both Anglo Platinum and its joint venture partner African Rainbow Minerals (ARM) with regard to defamatory statements made by him concerning the companies
(see also Human rights).

Engaging stakeholders at Obuasi

We held a 51% share in AngloGold Ashanti until April 2006, when we reduced our shareholding to 42%, which is the status at the close of our financial year. The gold producer has always been excluded from the scope of this report as it is an independently managed listed company which produces its own Report to Society.

This summary case study outlines one of AngloGold Ashanti’s key challenges in 2006. It received both media and NGO attention and highlights the steps taken to engage stakeholders in finding solutions. A workshop of interested parties identified the need for better stakeholder engagement and the need for economic development opportunities.

Mining has been taking place, in one form or another, at the Obuasi site in Ghana for more than 100 years and AngloGold Ashanti has to deal with significant environmental and social legacies, including those associated with artisanal and small-scale mining.

AngloGold Ashanti is in discussions with NGOs regarding joint investigation of legacy issues and current and future areas of concern. These include environmental issues, such as those related to water management, rehabilitation plans, arsenic management, final closure estimates and a legacy programme.

During 2006, the government of Ghana undertook an exercise to remove illegal artisanal miners from the property as they were causing safety and health problems and were sabotaging company property, leading to disruptions in production and human rights issues. This exercise took place without violence.

The company is balancing its obligation to protect its assets with the recognition that small-scale mining can be a legitimate means of earning a livelihood in a gold-rich area. It has applied to become a signatory to the Voluntary Principles on Security and Human Rights and has sought to adhere to the Principles. It is currently reviewing its policies and practices and standardising human rights training across the group.

During 2006, AngloGold Ashanti formally became an organisational supporter of the EITI. While an active supporter of the initiative since its inception, both via the company’s membership of the ICMM and individual corporate action, it was considered time to state the company’s support unambiguously.

As a matter of principle, AngloGold Ashanti has established a practice of disclosing all payments made to governments via its annual Report to Society, regardless of whether the country is a formal supporter of the EITI (see www.anglogoldashanti.com for Reports to Society).

Furthermore, in countries where governments have indicated a desire to be a part of the process, AngloGold Ashanti is actively involved in contributing to the success of the initiative. These countries include Ghana, Guinea, Mali and the Democratic Republic of Congo.

Silicosis

In South Africa, 19 separate court actions for personal damages allegedly sustained from the lung disease, silicosis, were launched against Anglo American South Africa by former mine workers. Anglo American denies that it is liable to any of the claimants and is defending the claims, 11 of which have been struck out
of court. Statutory compensation schemes in South Africa, to which gold mining and other companies are legally required to contribute, make provision for the payment of compensation for occupational diseases through a process administered by government.

Miners affected by silicosis, particularly former miners living
in rural areas, appear to experience practical difficulties in obtaining examinations, treatment and statutory compensation benefits.

Sensitive to these issues, representatives of the mining industry, trade unions and the government are working together to find practical and sustainable solutions to overcome these difficulties. This approach is likely to result in a speedier and more equitable outcome for all miners affected by silicosis than protracted and expensive litigation.