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Despite AngloGold Ashanti’s general cutting back on capital projects, two priority operations – Tropicana in Australia and Kibali in the Democratic Republic of the Congo (DRC) – have delivered good returns.

Both were completed below cost and poured their first gold in the fourth quarter of 2013, ahead of schedule, according to AngloGold’s new Integrated Annual Report.

In the report, released last week, AngloGold Ashanti details the wide-ranging changes it had to make to exploration activities, operational costs and capital expenditure, to cope with challenges in the gold market.

Due to a general cost-cutting strategy that aimed to reduce operational expenditure by $500 million, AngloGold had to reconsider exploration activities in more than a dozen jurisdictions. The company withdrew from 13 countries that did not fit its value proposition, focusing on only the most promising projects, which included its Australian and DRC assets.

“These high-margin operations, which together are expected to produce between 550 000 ounces and 600 000 ounces for our account in 2014, will make a significant contribution to cash flow,” AngloGold Ashanti chairman Sipho Pityana says in the report.

Pityana adds that the diminishing need for capital expenditure on these projects will further benefit cash flow.

Clashes in Colombia

Another region with encouraging prospects, according to AngloGold, is Colombia, although the miner’s La Colosa project has been met with fierce opposition from local communities.

Following a citizen-organised road block which prevented mine employees and vehicles from accessing the site, AngloGold lodged a legal complaint against local government, for failing to prevent the road block. There has also been a referendum voting against the mining company’s activities and a suspension order from a local environment authority.

Responding to community fears about water contamination, among other issues, will thus remain a key challenge for AngloGold in realising its Colombian mining ambitions, says Pityana.

Improving extraction tech

The need to develop better extraction methods led to continued work on new reef boring technology, in the form of the AngloGold Ashanti Technology Innovation Consortium (ATIC). A test site in the TauTona mine west of Johannesburg experimented with reef boring and the application of ultra-high strength backfill in 2013, with promising results.

“A successful outcome will open up the potential for more efficient, deeper and safer mining that would change the face of gold mining – and other deep-level mining – in South Africa,” says Pityana.

AngloGold reports reduced boring time, improved backfill capability, and the safe extraction of 40kg of high-grade, gold-bearing reef from 18 holes. During 2014, production sites are to be set up at four of the company’s South African mines.

“The aforementioned actions ensured that while we cut the combined exploration and technology expenses to $296 million in 2013 and forecast a further drop to between $150 million and $175 million in 2014, we maintained the long-term optionality crucial to the future of the business,” says AngloGold Ashanti CEO, Srinivasan Venkat.

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