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Brazil | Americas | Review of operations - AngloGold Ashanti Annual Reports 2011
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Americas

BRAZIL

Brazil – AngloGold Ashanti Córrego do Sítio Mineração (AGA Mineração)

Key statistics
AGA Mineração   2011 2010 2009
Pay limit (oz/t) 0.13 0.13 0.11
(g/t) 4.41 4.40 3.82
Recovered grade (oz/t) 0.217 0.210 0.205
(g/t) 7.43 7.21 7.02
Gold production (000oz) 361 338 329
Total cash costs ($/oz) 525 407 339
Total production costs ($/oz) 823 651 486
Capital expenditure ($m) 259 142 84
Productivity (oz/TEC) 17.41 18.32 15.45
All injury frequency rate (AIFR) (per million hours worked) 4.05 2.62 4.19
Average number of employees 3,825 3,426 2,964
Employees 2,715 2,486 2,249
Contractors 1,110 940 715
  1. *Underground operation
Gold production [graph] Capital expenditure [graph]
 
Total cash costs [graph] Average number of employees* [graph]
Description

AngloGold Ashanti Córrego do Sítio Mineração (AGA Mineração) comprises two operational units, namely the Cuiabá and the Córrego do Sítio complexes. The Cuiabá complex includes the Cuiabá and Lamego mines and the Cuiabá and Queiroz plants. In operation for 26 years, the Cuiabá mine is principally a cut-and-fill mine accessed by ramp and shaft. Lamego is a new mine developed to mine an underground sulphide ore. The first stage of the processing of the ore from Cuiabá and Lamego mines is in the gold plant at the Cuiabá complex, where concentrate is produced. The material is then transported 15km by aerial ropeway to the Queiroz plant where milling, flotation, roasting, leaching, precipitation and refining occur. Total capacity of the complete circuit is 1.65Mt/year and recoveries of 93% are achieved.

The Córrego do Sítio operation comprises one surface (oxide) and two underground (sulphide) mines, as well as a heap leach pad and sulphide plant, the latter originally acquired from Eldorado late in 2008 and since refurbished.

Performance

At AGA Mineração, production in 2011 was 361,000oz, 7% higher than the prior year. The higher output followed the ramp-up at Lamego and the start of production from Córrego do Sítio. Production was, however, negatively impacted by lower tonnage at Cuiabá, due mainly to geotechnical and fleet availability issues.

Cash costs of $525/oz were 29% up on the previous year, mainly due to labour cost inflation and higher energy consumption following the commissioning of the refrigeration plant in Cuiabá. Other factors were the stronger Brazilian real, lower volumes and higher unit costs from new Córrego do Sítio sulphide production. An improved price received for sulphuric acid, a by-product at the Cuiabá complex, had a positive impact on costs during the year.

The cost and availability of specialised mining skills remained key challenges in Brazil, where a surfeit of mining and engineering projects exacerbated an already tight labour market and inflated salaries. This trend is likely to continue for some time with additional mining and infrastructure projects set to proliferate in Brazil in coming years, along with additional development of iron ore capacity and preparations for the next FIFA World Cup in 2014 and the Olympic Games in 2016.

Project ONE implementation is ongoing and the BPF stabilisation phase was completed at Cuiabá, with benefits achieved in maintenance and production to counter the low availability of the fleet of heavy mechanised equipment. Renewed focus was placed on training to improve safety and productivity in high-dip areas, while trial mining using the sub-level bench method was successfully piloted and will now be extended to other areas of the mine. This change also mitigated geomechanical instability and is expected to result in improved productivity in 2012 and 2013.

Given the increased mining depth to more than 1,100m at Cuiabá by the end of 2011 and the resultant rise in working temperatures, a refrigeration plant was commissioned to service the deeper areas of the mine.

At Lamego, where tonnages improved by 15%, the drill method was changed to cross-cut instead of driving the ramp down to the mine’s deepest levels so as to improve knowledge of the orebody at depth. Now, more than 2.5 years of reserves are estimated to be available at current production rates, following development of ore drives from level 3.1 to level 4 at the Carruagem orebody. This enables a high level of mining flexibility.

While the scheduled maintenance shutdown at the pyrometallurgy plant at Queiroz was undertaken during the year, there was an unexpected shutdown of Plant A to undertake screening of the catalyst bed and removal of the roasters. Three new flotation cells were added to the Cuiabá plant and the wall of the tailings dam was lifted to cope with incremental production.

At Córrego do Sítio, the underground sulphide mine was developed and the orebodies prepared for the start of production during 2011. This mine had reached production capacity of 40% by year-end. The underground mine produced 171,000t in 2011. The metallurgical plant was commissioned in January 2012. The oxide heap leach plant improved its productivity 18% by increasing bench heights on the heap leach by 1m to 7m.

Growth and improvement

Both greenfield and brownfield exploration drilling campaigns continued, with the focus on increasing the gold resource base. At the end of 2011, the latest exploration drilling campaign added 817,000oz to the resource, taking AGA Mineração’s resource base to 11.4Moz.

It is anticipated that the stabilisation of Project ONE will aid continued improvements in equipment availability, which in tandem with mining method changes, will aid the drive to increase production from Brazil. This yielded cost savings and productivity improvements, optimisation of the heavy mechanised equipment fleet, and improved operational training. Cost reduction initiatives, including power-saving projects, will be a key focus area of management in 2012 and beyond.

Commissioning and mine ramp-up of the Córrego do Sítio project proceeded during the year and full production at Lamego mine was achieved in 2011. Scoping studies are in progress for both mines to determine further expansion opportunities. At Córrego do Sítio, additional sources of oxide and sulphide ores will enable an expansion.

The underground sulphide operation is ramping up and is expected to reach full production by the end of 2012. One of the principal operating challenges is to control dilution from the sub-level stoping by a greater focus on grade control, while keeping the ramp-up on track with the development of ramps and ore drives to ensure appropriate flexibility.

The Lamego project was completed at the end of 2011, with only minor changes to civil infrastructure required at a cost of some $2m. Meanwhile, further work is planned to improve knowledge of the upside in the oxide and sulphide endowment.

At Lamego, the first underground mine to achieve Project ONE BPF stabilisation, management focused on improvements to equipment reliability as well as better planning and scheduling. The success of crews in using the business improvement framework to realise significant improvements in productivity without increased capital expenditure, have demonstrated the possibility of increased throughput. The establishment of an operational control centre at the mine has further helped streamline operations.

At Cuiabá, work is underway to stabilise production in narrow veins and to investigate use of satellite orebodies to further boost production. Management also began investigating mining at depths greater than those envisaged in the current mine plan, beginning with a drilling campaign below the 24 level and the formation of a team to conduct improved geological mapping of the mine. Increased infill drilling will also be undertaken to facilitate the change of mining method, while brownfield exploration drilling will be conducted to determine the viability of restarting mothballed mining operations previously closed during periods of low prices and of locating satellite orebodies. Among the latter is the Nova Lima Sul project which envisages the development of smaller deposits close to current operations, which will use spare capacity at the Queiroz plant.

Sustainability

The safety performance at AGA Mineração deteriorated when compared to 2010, recording an all injury frequency rate of 4.05 per million hours worked. Regrettably, a contractor died when he was run over by a tractor at the tailings facility construction site.

Following a culture survey undertaken during the year, a safety behaviour plan was launched at all of AngloGold Ashanti’s Brazilian operations. Initiatives include improvements to the new employee induction course, a review of on-the-job training processes, and standardisation of safety processes. Also a new approach to incident investigation and analysis was established during the year. A proactive safety indicator to evaluate the quality of processes has been developed and AngloGold Ashanti Brazil has set targets to take all injury frequency rates to zero by 2020.

AGA Mineração has had no reportable environmental incidents for five years. The company was awarded the PMGA – Environmental Management Minas Gerais Award. The company also holds the following certifications:

  • ISO 14001 – Environment;
  • OHSAS 18001 – Occupational Health and Safety;
  • ISO 17025 – Laboratory analysis;
  • NBR 16001 – Social responsibility – 1st Brazilian mine company;
  • International Cyanide Management Code; and
  • ISO 9001 – Quality (Laboratory and smelter house).

The Brazilian operations support environmental education programmes and social investments in the communities where it operates. The company has an open-door policy with communities, communicating operational and environment-related information. Communities are informed in advance of the funds allocated to community investments and the host communities themselves participate in the selection of the projects. The company also invites all stakeholders, including communities, companies, suppliers, employees, NGOs and local government, to participate in an annual forum to promote discussion regarding social policy and practices. The aim of this dialogue is to identify opportunities for improvement.


Brazil – Serra Grande

Key statistics
Serra Grande     2011 2010 2009
Pay limit   (oz/t) 0.11 0.09 0.11
  (g/t) 3.89 3.20 3.92
Recovered grade   (oz/t) 0.105 0.118 0.132
  (g/t) 3.59 3.59 4.52
Gold production - 100% (000oz) 134 155 154
  - 50%   67 77 77
Total cash costs   ($/oz) 767 481 406
Total production costs   ($/oz) 1,149 690 542
Capital expenditure   ($m) 45 52 67
Productivity   (oz/TEC) 12.98 15.88 17.51
All injury frequency rate (AIFR)   (per million hours worked) 3.48 7.22 8.99
Average number of employees   1,339 1,268 1,289
Employees 1,039 965 864
Contractors 300 303 425
Gold production [graph] Capital expenditure [graph]
 
Total cash costs [graph] Average number of employees* [graph]
Description

Serra Grande is owned equally by AngloGold Ashanti and Kinross Gold Corporation. AngloGold Ashanti manages the operation located in central Brazil, in the state of Goiás, about 5km from the city of Crixás. Serra Grande comprises three mechanised underground mines: Mina III, Mina Nova (which includes the Pequizão orebody) and Palmeiras – and an open pit on the outcrop of Mina III orebody. One dedicated metallurgical plant treats ore from these different sources. Annual capacity of the processing circuit, which has grinding, leaching, filtration, precipitation and smelting facilities, is 1.15Mt.

Performance

Attributable production in 2011 was 67,000oz, compared with 77,000oz in 2010. The reduction was due primarily to higher-than-expected dilution and the resultant impact on mined grades. This was partly offset by a 5% increase in the total ore mined at the operation to 1.33Mt, with strong performance from the open pit and the Palmeiras underground mine in particular.

To improve the grade mined at Serra Grande, an action plan was compiled and new operational control measures for dilution and close monitoring of the drilling and blasting processes were implemented. Total dilution for all Serra Grande’s mining operations started in 2011 at more than 30% and closed the year with significant reduction to 18%. Other factors which contributed to the decline in production included delays in development which in turn slowed the preparation of production stopes. Poor availability of drill rigs, as well as heavy machinery and the equipment fleet, hampered underground drilling and overall operational performance.

In the plant, recoveries were curtailed by problems encountered in the grinding and filtering circuits. Each of these issues has been addressed with specific action plans developed to ensure they do not re-occur. Project ONE implementation is on track to support the operations.

Total cash costs increased by 59% to $767/oz as a result of reduced production as well as continued inflationary pressure on all mining-related inputs in Brazil and the impact of the stronger Brazilian real, which appreciated by 5% against the dollar in 2011.

Growth and improvement

The “fast-track exploration plan” at Serra Grande added 380,000oz to the inferred resource at this mature operation. About $20m will be invested in this campaign in the coming two years with the aim of adding a total of 1Moz to resources to further extend the life of the operation.

A priority for Serra Grande’s management is to facilitate closer co-operation between the geology, mine, plant and maintenance teams so as to reduce variability and so increase both underground mine output and plant throughput. This is a key benefit that will follow Project ONE’s BPF stabilisation on site and will assist in maintaining the required feed to the mill while also rebuilding the strategic stockpile which was depleted in 2010. Optimisation of the gravity circuit is planned to be completed in mid-2012, with expected further improvements in recoveries.

An operational control centre has been established on site to improve maintenance and enhance the general skill level of operators in order to achieve better operational performance and reduce breakdowns.

Pequizão and Palmeiras are the most recent discoveries and are the newest underground mines. Importantly, they have the highest grade reserves of all the Serra Grande operating areas but currently have modest development programmes, given that focus was previously on Orebody IV at Mina III. The focus now is on developing an optimal mine sequencing plan to make the best possible use of these higher grade areas.

In the longer term, beyond 2013, the focus of the exploration effort will shift to increasing the operation’s mineral endowment to increase mine life.

Cost saving will also continue to receive attention, with benefits still flowing from the ongoing programme which began in 2005 to develop alternative sources of supplies. A new programme called MSG2020 will also evaluate technical alternatives in mine design, sequencing and metallurgical processes to seek improvements in production and returns on invested capital.

Sustainability

The operation’s all injury frequency rate of 3.48 per million hours worked in 2011 compares with 7.22 in 2010. No lost time injuries have been reported for an impressive 19 months and no fatalities for more than three years.

Following a culture survey undertaken during the year, a safety behaviour plan was launched at all Brazilian operations. Initiatives include improvements to new employee induction, a review of on-the-job training processes, and standardisation of safety processes. A new approach to incident investigation and analysis was established in 2011. A proactive safety indicator to evaluate the quality of processes has been developed and AngloGold Ashanti Brazil has set targets to reduce all injury frequency rates to zero by 2020.

There have been no reportable environmental incidents at Crixas for seven years. Serra Grande was the first mining company to receive an environmental award by the environmental agency in the state of Goiás. The company also holds the following certifications:

  • ISO 14001 – Environment;
  • OHSAS 18001 – Occupational health and safety;
  • International Cyanide Management Code; and
  • ISO 9001 – Quality (Laboratory and smelter house).

The Brazilian operations support environmental education programmes and intensive social investments in the communities where it operates. The company has had a positive and constructive relationship with its host community in Crixas for some time. During 2011, the company extended its engagement with local communities and also provided support for 11 cultural projects focused on education, sport and the preservation of Crixas’ cultural heritage.

There is an open-door policy with communities, communicating operational and environment-related information. Communities are informed in advance of the funds allocated to community investments and the host communities themselves participate in the selection of projects.

All stakeholders, including communities, companies, suppliers, employees, NGOs and local government to participate in an annual forum are invited to promote discussion regarding social policy and practices. The aim of this dialogue is to identify opportunities for improvement.