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Annual report suite 2012

South Africa

South Africa [map]
Mike O’Hare

Mike O’Hare
Executive Vice President
South Africa Region

Gold production (000oz) Average number of employees
OPERATIONS
1 South Africa
Vaal River
Great Noligwa 84 3,063
Kopanang 164 6,014
Moab Khotsong 162 6,645
Surface operations 144 1,147
Mine Waste Solutions (1) 28 727
West Wits
Mponeng 405 6,262
Savuka 37 1,157
TauTona 189 4,472

Regional profile

AngloGold Ashanti’s six deep level South African mines and surface operations are divided into two regions, Vaal River and West Wits.

Vaal River

The Vaal River mining operations in the South Africa Region are Great Noligwa, Kopanang and Moab Khotsong. These mines are located roughly 170km to 180km from Johannesburg in the vicinity of Orkney and Klerksdorp, near the Vaal River on the Free State-North West Province border. The three mines share a milling and treatment circuit.

  • Great Noligwa is a mature operation. It adjoins Kopanang, in the Free State, and Moab Khotsong. The Vaal Reef, the operation’s primary reef, and the Crystalkop Reef, a secondary reef, are mined from a twin-shaft system over eight main levels at an average depth of 2,400m. Given the geological complexity of the orebody at Great Noligwa, the pillar mining method is employed.
  • Kopanang is located to the west of neighbour Great Noligwa and bound to the south by the Jersey Fault. Gold is the primary output, with uranium oxide produced as a byproduct, from a single shaft system to a depth of 2,600m. It almost exclusively exploits the Vaal Reef, although minor amounts of gold are also extracted from the secondary Crystalkop Reef. Given the geological complexity of the orebody, scattered mining is used.
  • Moab Khotsong is AngloGold Ashanti’s newest gold mine in South Africa. Stoping operations began in November 2003, with the mine expected to reach full production in 2013. Given the geological complexity of the Vaal Reef, scattered mining is employed. The Zaaiplaats orebody in the Moab Khotsong lease area presents a significant growth opportunity and capital has been allocated to support its phased development.
  • Surface operation (metallurgy) extracts gold from marginal ore dumps and tailings storage facilities on surface at various Vaal River and West Wits operations where there is more metallurgical capacity than reef mined. Uranium is produced as a by-product, as is backfill for use as support in mining operations. The surface operation includes the rail transport infrastructure, the Vaal River and West Wits Laboratories and tailings management facilities. Although there is more than one surface operation they are technically reported as one.
  1. (1) On 20 July 2012, AngloGold Ashanti acquired First Uranium (Pty) Limited, which owns Mine Waste Solutions (MWS). MWS is a recently commissioned retreatment operation in South Africa’s Vaal River area in the immediate vicinity of AngloGold Ashanti’s own tailings facilities.

West Wits

The West Wits operations are Mponeng, TauTona and Savuka. These three mines are situated southwest of Johannesburg, in the vicinity of the town of Carletonville, on the border between Gauteng and North West Province.

  • Mponeng, the South Africa Region’s flagship operation and the world’s deepest gold mine, exploits the Ventersdorp Contact Reef (VCR) at depths of between 2,400m and 3,900m. The mine uses sequential-grid mining. Mponeng comprises a twin-shaft system housing two surface shafts and two sub-shafts. Ore is treated and smelted at the mine’s gold plant.
  • TauTona lies on the West Wits Line. Mining takes place at depths of between 1,850m and 3,450m. The mine has a three-shaft system, supported by secondary and tertiary shafts, and is in the process of converting from longwall to scattered-grid mining.

    The change in mining method was necessitated by the increasingly complex geology being encountered and the unsuitability of the current method for mining through the Pretorius fault. This change is also expected to improve safety.
  • Savuka exploits the Carbon Leader Reef (CLR) at depths of between 3,137m and 3,457m and the VCR at a depth of 1,808m. It shares a processing plant with neighbouring mine, TauTona.

The West Wits team conducted an investigation into the incorporation of Savuka, which is nearing the end of its working life, into either TauTona or Mponeng. Post year-end, the investigation concluded that the optimal, most efficient solution to accessing Savuka’s remaining Ore Reserves would be via TauTona’s infrastructure.

Key performance indicators

AIFR – South Africa [graph] Production – South Africa [graph] Productivity – South Africa [graph] Total cash costs – South Africa [graph] Number of reportable environmental incidents – South Africa [graph]
South Africa – key statistics
Units 2012 2011 2010
Operation
Tonnes treated/milled Mt 22.3 16.4 17.0
Pay limit oz/t 0.40 0.54 0.53
g/t 12.41 11.98 12.02
Recovered grade oz/t 0.219 0.232 0.212
g/t 7.50 7.95 7.28
Gold production 000oz 1,212 1,624 1,785
Total cash costs $/oz 873 694 598
Total production costs $/oz 1,097 910 809
Capital expenditure $m 583 532 424
Productivity oz/TEC 4.19 5.85 5.63
Safety
Number of fatalities 11 9 10
AIFR per million hours worked 13.24 15.57 16.69
People
Average no of employees: Total 34,186 32,082 35,660
Permanent employees 29,740 28,176 31,723
Contractors 4,446 3,906 3,937
Environment
Total water consumption ML 23,833 18,821 20,896
Total water usage intensity kL/oz 19.66 11.60 11.70
Total energy usage million GJ 11.64 11.68 12.37
Total energy intensity GJ/oz 9.59 7.19 6.93
Total greenhouse gas (GHG) emissions 000tCO2e 3,132 3,079 3,419
Total GHG emissions/oz tCO2e/oz 2.58 1.90 1.92
Cyanide (1) used t 6,129 3,913 4,575
No. of reportable environmental incidents 10 12 10
Rehabilitation liabilities: Total $m 148.8 154.8 184.4
Restoration $m 43.7 73.7 90.6
Decommissioning $m 105.1 81.1 93.8
Community
No. of reportable community incidents 2
Community expenditure (2) $000 7,700 3,670 3,242
Payments to government $m 251 313 199
Dividends $m
Taxation $m 81 102 38
Withholding tax (royalties, etc) $m 29 71 35
Other indirect taxes and duties $m 1
Employee taxes and other contributions $m 131 132 117
Property tax $m 3 3 3
Other (includes skills development) $m 6 5 6
  1. (1) International Cyanide Code compliance – certification date: The South Africa operations were certified in 2007, and recertified in 2010.
  2. (2) Includes corporate social investment expenditure

Performance in the South Africa Region in 2012

Safety and health
Regrettably, there were 11 fatalities in 2012 (2011: 9). The number of fatalities remains of serious concern to the company. TauTona achieved 4 million fall-of-ground fatality free shifts in November and Kopanang achieved 1 million fatality free shifts in December, both notable achievements. For the region as a whole, an all injury frequency rate of 13.24 per million hours worked was reported as compared to 15.57 in 2011.
Production
The South Africa Region milled 22.3Mt of ore in 2012, up by 36% on the previous year, primarily due to the acquisition of Mine Waste Solutions, effective 20 July 2012. The Vaal River operations accounted for 582,000oz (48%) of the South Africa Region’s production and the West Wits operations for 631,000oz (52%). Combined, this was equivalent to 31% of group production. In addition, the Vaal River operations produced 1.21Mlb of uranium as a by-product.

Total cash costs for the South Africa region were $873/oz, compared with $694/oz in 2011. Mponeng, with a cash cost of $639/oz, was the lowest cost producer in the region with Great Noligwa, which is approaching the end of its operating life, being the highest at $1,226/oz. Cost increases were largely influenced by reduced production, and higher wages and input prices (energy and fuel). The primary cost components in 2012 were: labour $363/oz; consumables $253/oz; services $68/oz; and other inputs $189/oz.

The operating environment in South Africa remained challenging, with safety-related stoppages continuing to be disruptive, especially in the first half of the year. An industry-wide strike which started in the third quarter and continued into the fourth quarter, halted all mines and plants in South Africa for about six weeks. The total loss of production as a result of the strike and the slow ramp-up to full production, necessitated by geotechnical concerns resulting from the stoppage, was about 235,000oz. Seismic activity at the West Wits operations was also problematic and geological limitations, coupled with lower mining grades at the Vaal River operations and above-inflation cost pressure, presented an ongoing challenge.
Capital expenditure
Capital expenditure in the South Africa Region totalled $583m, an increase of 9.6% on the $532m spent in 2011. The bulk of this was spent at Mponeng ($194m), Moab Khotsong ($159m), Kopanang ($93m) and TauTona ($73m). This brings total capital expenditure in the region over the past five years to $2.27bn.
People
The South Africa operations employed an average of 34,186 people during the year (2011: 32,082), of whom 4,446 (13%) were contractors and 29,740 (87%) permanent employees. This was equivalent to 52% of the group’s total workforce. Productivity per employee for the year was 4.19oz/TEC (2011: 5.85oz/TEC) – the lowest in the group – a function of work stoppages, decreasing grades and the increasing labour intensity of deep level underground mining operations in South Africa.

Roll-out of the Simunye safety and productivity training programme, which began in May 2011, continued. Simunye, which was designed for production crews and supervisors, aims to promote cohesive team work in support of business objectives. By year-end, 67% of all stoping crews and 5% of all development crews in the region had received Simunye team training. Crew performance is monitored continuously to determine the efficacy of the programme. Indications are that the Simunye programme has resulted in improved safety performance, face advancement, volumes mined and sweepings.
Communities
AngloGold Ashanti continues to meet the targets set in its Social and Labour Plans (SLPs). The region has developed a framework to address the socio-economic focus areas within and outside of the business over a three-year period. This involves partnerships with government as well as with social and industry stakeholders to address economic gaps created as the operations mature and production declines. Good progress was made with the group’s housing and accommodation programme – $10m was invested on this in 2012, and conversion of all housing units to single or family accommodation is expected to be completed in 2013.
Environment
The reduction in reportable environmental incidents in 2010 and 2011 was maintained in 2012, with most of these incidents in 2012 taking place at the newly acquired MWS operations. Since taking ownership of MWS in July 2012, considerable resources have been dedicated to ensuring this long-life asset meets AngloGold Ashanti’s rigorous environmental operating standards. The potential for inter-mine flooding and water legacy issues continued to be environmental challenges.

Similarly, access to land and land use are of critical importance, for exploration and mining as well as ancillary infrastructure. The issue of biodiversity has also become increasingly prominent.
Mineral Resource and Ore Reserve
At 31 December 2012, AngloGold Ashanti had a total attributable Mineral Resource (inclusive of the Ore Reserve) in South Africa of 98.60Moz (2011: 97.63Moz) and a total attributable Ore Reserve of 31.56Moz (2011: 32.43Moz), equivalent to 41% and 43% respectively of the group’s Mineral Resource and Ore Reserve.
Growth
Notable progress was made with the Mponeng deepening below 120 level project, which will extend Mponeng’s life of mine. The first phase of this project, which accesses the VCR, is on track to begin production in April 2014. Phase 2, which will access the CLR below the 120 level, was approved by the AngloGold Ashanti board in March 2012. Infrastructure development is under way with production from the second phase scheduled to begin in 2016.

The Moab Khotsong business plan, without growth projects, is expected to produce some 3Moz of gold until 2023. Zaaiplaats will provide an additional approximately 4.8Moz, extending the mine’s life and serving as a gateway for opportunities beyond the initial target block. Phase 1 of the Zaaiplaats project, approved in July 2010 and currently in implementation, is dedicated to establishing the infrastructure for Phase 2, which will create a drilling platform to increase geological confidence within the greater Zaaiplaats orebody while providing some initial gold production. Phase 2 will realise approximately 558,000oz of gold. Phase 3 is currently in prefeasibility study phase. A full feasibility study, to begin in the first quarter of 2013 and to run for about a year, includes various options of accessing the orebody through either Moab Khotsong or Kopanang, while accessing other mining blocks adjacent and contiguous to Project Zaaiplaats.
Outlook*
In 2013, production is expected to be between 1.331Moz and 1.429Moz at a total cash cost of between $777/oz and $805/oz. Capital expenditure of around $506m is planned, mainly on projects at Mponeng and Moab Khotsong.

The current two-year wage agreement expires in June 2013 and, following the recent strike, new wage negotiations have been brought forward and are expected to begin in May 2013. Given that there is a new and significant union in place, the Associated Miners and Construction Union (AMCU), AngloGold Ashanti expects a challenging set of negotiations. AngloGold Ashanti has committed to working with all representatives and employee associations to build relationships.

  1. * AngloGold Ashanti may not be able to reach these targets. Refer to the “Forward-looking statements” of this report, to the section entitled “Understanding and mitigating our risks”, and to the page entitled “Risk factors related to AngloGold Ashanti’s suite of 2012 reports”.