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Project review

GROWTH PROJECTS
GEARING UP


AngloGold Ashanti’s investment in greenfield exploration and projects in recent years has begun to bear fruit. To date, five greenfield projects are being advanced and developed further.

They are:

  • In Colombia, in the Americas region:
    • Gramalote; and
    • La Colosa.
  • In the DRC, in the Continental Africa region:
    • Kibali; and
    • Mongbwalu.
  • In Australia, in the Australasia region:
    • Tropicana.

Of these, Tropicana is the most advanced.

Americas – Colombia

Gramalote

Description

The Gramalote project, a joint venture between AngloGold Ashanti Limited (51%) and Vancouver-based B2Gold, is located 110km northeast of Medellin in the municipality of San Roque, which is in the department of Antioquia, Colombia.

The project, managed by AngloGold Ashanti, is expected to be the group’s first operating gold mine in Colombia, establishing its operating credentials in the country.

Key statistics – Gramalote (100%)
    2011
Number of employees (including contractors)   246
Mineral Resource (inclusive) Moz 4
Ore Reserve Moz Undefined as yet
Progress

Year 2010 marked the return as operator and project manager for AngloGold Ashanti after it took over a stake from B2Gold to undertake the prefeasibility and feasibility analyses. AngloGold Ashanti immediately accelerated the drilling programme to improve knowledge of the orebody and increased the project’s resource.

During 2011, a total of 30,683m of drilling was undertaken and the resource increased by 83% to 4Moz as drilling was undertaken on satellite areas adjacent to the main Cerro Gramalote orebody. This work built on the foundation created by B2Gold, which had completed an earlier scoping study on the project.

Since September 2010, when AngloGold Ashanti assumed control of the project, 33km of drilling has been completed.

The initial scoping study envisaged production of between 250,000oz and 300,000oz of gold a year, though the recent resource upgrade, continued exploration success and favourable metallurgical testwork suggest the potential to increase the scale of the project.

Gramalote has several inherent advantages, most notable a benign climate, good infrastructure and good access to water and power. In addition, the area’s relatively flat topography presents good opportunities for tailings storage. Most importantly of all, however, is a high level of community support for the project during the initial exploration and prefeasibility study-phases.

Also, the relationship with artisanal and small-scale miners who operate in the general area and in the proposed project area is positive, with ongoing negotiations on relocation and new activities sought by these miners.

The successful development of Gramalote offers an ideal opportunity for AngloGold Ashanti to establish its project development credentials to the host community and to the broader Colombian population. This will demonstrate that it can successfully, sustainably and safely develop a modern mining operation that improves the livelihoods of host communities and provide a long-life operation with predictable income flow for employees, local municipalities and the Colombian government.

The project will also help establish the necessary legal precedent for the country’s nascent large-scale gold mining industry, an important potential source of foreign direct investment for the country and substantial fiscal revenues, in line with the government’s economic growth objectives.

Almost $30m was spent on the prefeasibility study in 2011, which included exploration on only about 10% of the 30,000 hectare concession area. This study is expected to be completed during 2012, and will be followed immediately by the full feasibility study which is expected to be completed in 2013. Construction is envisaged to begin in 2014 and first production in 2016.

Given the increase in the resource and the continued potential for more ounces to be added as drilling continues, trade-off studies are underway to determine the optimal size of the project.

Sustainability

Much of Gramalote’s support stems from the promise of economic development it will provide for a community with 35% of its inhabitants in poverty and 12% in extreme poverty. About 14% of San Roque’s inhabitants are unemployed. In addition, the project has established a corporate social responsibility programme which includes supporting existing activities and social infrastructure.

The possible relocation of the artisanal miners and some agricultural activities will be undertaken following international standards. Initial negotiations with artisanal miners and discussions of possible relocation have been able to successfully establish trust with the population. Relationships with the regional environmental authority have been very positive and are based on the mutual interest of building a successful, sustainable mining operation in the region.

La Colosa

Description

The exploration rights at the La Colosa project are wholly held by AngloGold Ashanti. This gold project is located 14km from the town of Cajamarca, in the department of Tolima, in Colombia. La Colosa, which lies in steep terrain in Colombia’s central Cordillera province, is the largest greenfields discovery made by AngloGold Ashanti, with the resource currently at 16Moz. Exploration drilling at site resumed toward the middle of 2010 after a two-year hiatus to receive or renew permits necessary to continue work on this gold porphyry deposit.

Key statistics – La Colosa
    2011
Number of employees (including contractors)   550
Mineral Resource (inclusive) Moz 16
Ore Reserve Moz Undefined as yet
Progress

Crucially, key capacity was built with a world-class team assembled to: develop the appropriate sustainability model for La Colosa; build the technical case for the project; execute its development and work closely with all stakeholders to secure the necessary permits and approvals.

The year in review marks significant progress for this project, which lies in a 600km2 concession and has the potential to provide a quantum-leap in production for AngloGold Ashanti. It lies in land designated under Colombian law as a “forest reserve”, a legal term for a tract of land designated for forestry use. Nevertheless, extraction permits, following a revised permitting process, are required to reclassify land needed for mining development.

The prefeasibility study currently underway is scheduled for completion in 2014. It will define the extent and size of the resource, conduct metallurgical testwork, weigh the alternatives for mining and processing infrastructure, purchase land necessary for access and infrastructure development and conduct the necessary social and environmental impact baseline studies.

An international geotechnical and tailings review panel, with world-class independent experts, was established in 2009 to ensure design, construction, and operating and closing use of these facilities endeavour to use industry best-practice and technology.

Indicative capital expenditure on the project is about $3.4bn with a total cash cost initially estimated at around $495/oz. These figures will be updated on completion of the prefeasibility and feasibility studies ahead of construction which is scheduled to start at the end of 2015. First production is targeted for late 2019.

About 47,619m of drilling was completed during 2011, with resources increasing by 30% to 16Moz. The year ended with five rigs working on site, following an increasingly encouraging set of drill results – higher-than-average grades over significant widths marked each quarter. In particular, results like 202.4m @ 2.27g/t Au from 236m, in the fourth quarter, were among several that compared favourably to the deposit’s average grade of about 1g/t and provided continued confidence in the potential for expansion of the previously defined mineral system. Almost $64m was spent on the prefeasibility study during the year.

At a time when many of the world’s newest gold deposits are built in remote regions, La Colosa lies less than 6km from a national highway, close to Colombia’s main power grid.

Sustainability

The logistical advantages posed by the project’s steep topography are obvious, while the mineral potential is increasingly impressive. Nevertheless, the challenge at La Colosa relates to securing an unequivocal social licence to operate and to showing the economic and social benefits of the project to the local community. AngloGold Ashanti will be sensitive to the needs of local communities – specifically as these pertain to security of the water supply and minimising the environmental impact. Already, even in the early stages of the project, part of the water required for the exploration phase has been drawn from rainfall and recycled by a system developed by the AngloGold Ashanti team on the ground. Drill platforms are built from, rather that dug into, the mountain to further minimise the impact.

While water use is of concern in this mostly agricultural region, infrastructure location will also be analysed to minimise water use and reduce impacts on critical water sources. In addition, preliminary figures demonstrate that there would be no material impact on agricultural or domestic use by the project.

The in-country team continues to work on a broad awareness and education campaign to show the benefits of responsible mining, while explaining how impacts are mitigated and compensated for to achieve a net positive impact.

Continental Africa – DRC

Kibali

Description

The Kibali gold project is a joint venture between AngloGold Ashanti and Randgold Resources, with each owning a 45% stake and Société des Mines d’Or de Kilo-Moto (SOKIMO), a state-owned gold company, which owns the balance.

Kibali, acquired with the purchase of Moto Goldmines in 2009, lies in the north-eastern DRC, adjacent to the town of Doko, a staging point for the project and 180km by road from Arua, on the Ugandan border. Jersey-based Randgold, also AngloGold Ashanti’s partner at the Morila gold mine in Mali, is the operator and project manager at Kibali.

Pre-development work on the project began in early 2011, and first gold production is scheduled for around the beginning of 2014. Full production is expected in 2015.

Key statistics – Kibali
    2011
Number of employees (including contractors)   688
Mineral Resource (inclusive) Moz 8.38
Ore Reserve Moz 4.52
Capital expenditure $m 73
Progress

By the end of 2011, the construction crew had started mobilising on site, a process expected to be completed during the first quarter of 2012. Long-lead plant and equipment items were secured, key contractors selected and a development management team assembled.

The relocation programme for nearby villages – a critical component of Kibali’s pre-development phase – progressed smoothly through the year, with two of the 14 villages affected already resettled in the new model village of Kokiza by December. Five local contractors are building houses at the rate of 300 per month, thereby assisting with local economic development in the region.

The final feasibility study and integrated execution plan for the project is due to be presented to AngloGold Ashanti’s board for approval in the first half of 2012. Until then, AngloGold Ashanti has agreed to continue to fund its share of the critical path items needed to ensure the timeline for the project was not compromised. Final capital, production and cost estimates will accompany the announcement of the project’s final approval.

The Kibali mine will comprise an integrated open pit and underground mining operation, feeding a larger 6Mt a year processing plant which will include a full flotation section for treating sulphide ore. The complex will ultimately be supplied by four hydropower stations supported by a thermal power station for low rainfall periods and back-up. The core capital programme is scheduled to run over the next four years.

Phase 1 of the project, required to deliver the mine’s first gold production, will cover the metallurgical facility, one hydropower station and back-up thermal power facility, construction of a tailings storage facility, relocation of villages, open-pit mining and all shared infrastructure. This phase will run over a two-year period.

Phase 2, which will run concurrently with Phase 1 but will extend over four years, will focus primarily on development of the underground mine and include a twin-decline and vertical shaft system, along with three hydropower stations. This is expected to bring the underground operation into first production by the end of 2014, with steady state production targeted for the end of 2015.

The project’s community development plan also seeks to support food security initiatives with a view to reducing community dependence on artisanal and small-scale mining.

The project has an improved environment adjustment plan, which is the legal permit required before mining commences. An environmental and social impact assessment, however, has been undertaken to comply with new environmental legislation, and to provide guidance for the development of an integrated environmental management plan that allows the mine to be constructed and operated responsibly and minimises future liability for shareholders.

Mongbwalu

Description

The Mongbwalu gold project in the northeastern DRC, is a venture between AngloGold Ashanti, which owns an 86.22% stake and SOKIMO, the state-owned gold company, which owns the balance. The deposit lies about 48km northwest of the town of Bunia, a staging point for the project. Preparatory work at the project has been completed, and first gold production is scheduled for the beginning of 2014.

Belgian mining companies operated on a relatively small scale in the area for about 50 years before leaving in 1961, while SOKIMO began mining in 1966.

The area around Mongbwalu has historical recorded gold production of about 2Moz of gold. The venture holds 18 tenements which, at the end of the year, covered an extensive area of 5,487m2. About 600 people are currently employed on site.

Key statistics – Mongbwalu
    2011
Number of employees (including contractors)   603
Mineral Resource (inclusive) Moz 2.06
Ore Reserve Moz Undefined as yet
Progress

The preliminary scoping work envisaged an initial underground mine in the Adidi area of the resource, with the necessary infrastructure designed to generate cash flow to fund further exploration and expansion activities within the demarcated area belonging to the venture.

The feasibility study for the project was completed in March 2011, after which the business and technical development teams conducted the normal optimisation process through the balance of the year. Approval by the venture board is expected in March 2012, when the final feasibility study and integrated execution schedule is to be presented.

The project is a beachhead for AngloGold Ashanti in the highly prospective Kilo greenstone belt. The initial project will be designed and built with a view to increasing its size as the aggressive regional exploration programme identifies new sources of ore. Capital and cost estimates for the project will be released along with the announcement of its approval.

Upgrading of staff accommodation on site was undertaken during the year. Substantial progress was also made on the construction of the 60km road to Bunia and a hydropower plant was refurbished.

Regional exploration continued on the 5,487km2 Kilo concession. The brownfield exploration team continued drilling in support of the project on the Adidi and Kanga Mineral Resource. Greenfield exploration activities continued on five targets, namely Lodjo, Issuru, Dala, Alosi Camp 3 and Petsi. An IP survey was completed for Camp 3 (Kilo Central) while diamond drilling continued at Pili Pili (Pluto North- Issuru). Trenching and soil sampling continued in Kilo Central and Kilo North.

Sustainability

A concerted focus was placed on sustainability issues to support environmental and community development over the life of the project, which promises to be an important source of economic and social development both for the immediate region and for the DRC as a whole.

Crucial to this process are the health and environmental baseline assessments commissioned during the year to determine risks and benefits of developing and operating a new, modern mine in the area. The venture contributed support to staff at the Mongbwalu hospital and also to the area’s schools, benefitting 60 teachers and more than 2,000 students.

Equipment and materials were also provided to assist in rebuilding the area’s primary schools which were damaged in the country’s recent conflict. Funds were committed for the rehabilitation of 12 water sources in the area.

At the request of the community, a bridge over the Tili river was rebuilt and assistance provided for the refurbishment of the city offices.

During the year, a literacy and microsavings programme commenced that now reaches throughout the concession and includes mostly women’s groups but also small groups of artisanal miners saving in order to create new opportunities. In addition, these groups receive business training. It is envisaged that as they save and develop solidarity they will create enterprises that may grow along with the regional economy. One such group has already purchased a flour mill and another has begun raising animals. The venture also held workshops on women’s issues and on artisanal mining.

Australasia – Australia

Tropicana

Description

The Tropicana project, an unincorporated joint venture between AngloGold Ashanti Australia Ltd (70%) and Independence Group NL (30%), is located 330km eastnortheast of Kalgoorlie in Western Australia. The project is managed by AngloGold Ashanti on behalf of the joint venture partners.

Key statistics – Tropicana
    2011
Number of employees (including contractors)   132
Mineral Resource (inclusive) Moz 4.49
Ore Reserve Moz 2.74
Capital expenditure $m 73
Progress

The project development approval was obtained in November 2010 at a total attributable capitalised development cost of A$530m to establish a new 6Mt a year gold mine with a life of about a decade. Ongoing exploration success is expected to add to the operation’s life.

First gold production is anticipated in late 2013. Elevated production from higher grade zones is expected for about the first five years. The average total cash cost of the life of the project is currently estimated at A$590-A$710/oz.

Lycopodium Minerals was engaged in early 2011 to provide engineering, procurement and construction management services to develop the infrastructure and processing plant. Macmahon has been awarded the mining contract and is responsible for the design and establishment of the infrastructure required to support mining operations.

By 31 December 2011, the project had progressed to schedule and within the approved budget. All regulatory approvals have been obtained. The necessary infrastructure, including access road, airstrip, accommodation village and telecommunications services were at advanced stages of development. Full transportation access to the site has been achieved.

Engineering and design for processing plant and infrastructure was approximately 75% complete at the end of the year. Procurement of all equipment was 90% complete and the delivery of the equipment was in line with the project schedule.

Construction of the processing plant began in late 2011 with bulk earthworks for the plant site and internal access roads and concrete works scheduled to commence in early 2012.

A new Mineral Resource estimate was completed for Tropicana at year-end, with a 1.05Moz increase bringing the total resource to 6.41Moz (100% basis). The increase was attributable to drilling in the Havana Deeps area, between the site’s Tropicana and Havana pits. Exploration drilling has continued in the area.