ANGLOGOLD ASHANTI Declares Intention To Cut Costs

Obuasi MineGold mining giant Anglogold Ashanti has declared its intention to implement a number of initiatives to cut costs.
AngloGold Ashanti would aim to save some $500 million in capital costs over the next 18 months, with capital expenditure directed towards the group’s highest quality assets.

It would also look to suspend some of its projects that were yielding lower returns, Graham Ehm, Executive Vice President at AngloGold Ashanti, gave the hint to Mining Weekly Online on the sidelines of the Diggers and Dealers conference, in Kalgoorlie, Australia.
The company has 21 operations in ten countries including Ghana.

The operations on the chopping block would only be revealed during the company’s quarterly results presentation today, but Mr. Ehm noted mines operating at above a cost of $1 200/oz would likely be on the line.

“But you have to be careful when doing that, because it will cost money to put a mine on care and maintenance or to close down. And you don’t want to close a mine abruptly, because that is the wrong thing to do for the workers and the community,” Mr. Ehm said.

He said that instead, AngloGold Ashanti would look at how operations at the affected mines could be altered in the short term, allowing the miner to proceed with a closure in a logical manner.

Mr. Ehm further said that both brownfield and greenfield exploration spending would also be reduced through more tightly focused global and mine site programmes, with corporate overheads being significantly rationalised.

“Although the gold price has tumbled, and has brought about a sense of despair and panic, I see an opportunity for optimism and for the industry to readjust to a lower gold price.”
In Ghana, for example, AngloGold Ashanti’s Obuasi mine gold output was less than 300,000 ounces last year and the current goal is to reinforce the mine to enable it produce 500,000 ounces in the next three to four years.

At a meeting at Obuasi for its business and external stakeholders to outline the strategy to uplift the mine, Mark Morcombe, Senior Vice President of Obuasi Operations, said management was placing emphasis on new technologies, which include mechanisation of the underground infrastructure, underground development and underground mining, adding that new jumbos and scoops were being imported to fast track the operation to ensure increase gold recovery.

Obuasi is also reducing numbers given the fact that it is producing less than 300,000 ounces at over $1600 per ounce, with a labour force of 8000 Ghanaians.

Mr. Ehm said that the resources industry had shown itself to be innovative, with a determination to survive and prosper.
He said AngloGold Ashanti was tackling the issue head on, adding that “With new projects coming on stream and the application of new technology, along with focused initiatives to drive down costs, we will emerge as a stronger and different  company in the future.”
Mr Ehm stated that critical to the strategy of growing company margins was the successful development of new, lower-cost operations to adjust the company’s asset mix and restructure the portfolio.

“We have two new mines scheduled to come on stream this year; Tropicana, which is a joint venture with Independence Group; and Kibali, in the Democratic Republic of Congo, which is a joint venture with Randgold Resources.”

Mr. Ehm noted that combined, these projects would add between 550 000 oz and 600 000 oz of production in 2014, at a combined average total cost of around 30 per cent less than the current average.
Both projects were on schedule and within budget.

The Tropicana project, in Western Australia, would deliver between 470 000 oz/y and 490 000 oz/y over its first three years of production, with first gold pour expected in the September quarter.

“First gold is obviously a significant milestone, but achieving a smooth ramp-up and steady-state production is just as significant. We’ve modelled Tropicana against other similar operations to generate a ramp-up profile, and expect to be at 91 per cent availability within four to five months,” Mr. Ehm added.

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