AngloGold Ashanti will reopen its idled Obuasi mine after Ghana approved a plan to redevelop the asset as a more profitable, mechanised operation.
Obuasi, which for years battled incursions by illegal miners, is expected to start gold production by the third quarter of 2019, AngloGold said in a statement on Tuesday. The initial cost of the project will be $450 million to $500 million over the first two and a half years.
The company would consider taking on a partner for the asset if it receives a good enough offer but can manage the project alone, chief executive officer Srinivasan Venkatakrishnan said on a call with reporters.
AngloGold curtailed operations at the aging Obuasi mine at the end of 2014 after incurring heavy financial losses. The Johannesburg-based company was working on plans to redesign the mine when it was overrun by informal miners in 2016, forcing the company to evacuate its employees.
AngloGold was able to clear the site and has signed a raft of agreements with the government of Ghana that are pending parliamentary approval. Obuasi has reserves of 5.8 million ounces and will operate at costs lower than AngloGold’s current average, the company said. Annual gold output will average 350 000 ounces to 450 000 ounces during the first ten years.
The government has committed to provide security at the mine, Venkatakrishnan said.
“The project metrics show a high-return, long-life project that not only brings ounces to account quickly and profitably, but also offers attractive returns on our investment,” he said said in the statement. “Obuasi now has the mine and labor plan, geological understanding and social model to match its world-class, high-grade ore body.”
AngloGold agreed in October to sell South African mines to Harmony Gold Mining Co and a Chinese investment firm that will halve the company’s production in its home country. The South African operations had dragged down AngloGold’s performance as ageing infrastructure, reserve depletion and accidents raised costs and reduced production.
Headline earnings, which exclude some one-time items, fell to $27 million for 2017 compared with $111 million a year earlier.
AngloGold rose 0.2% by 9:40 am in Johannesburg. The stock has fallen 5.9% this year.
© 2018 Bloomberg