Mark Morcombe, Senior Vice President, Obuasi Operations and John Owusu, General Manager, Public Affairs, AngloGold Ashanti Ghana

AngloGold Ashanti Ghana discusses the future of Ghana and their Obuasi gold mine.

Mark-Morcombe_BLOGObuasi is AngloGold Ashanti’s chief asset in Ghana. Can you provide us with a brief introduction to its long history and your plans to revamp production?

MM: Over the last 116 years, the Obuasi mine has had a lot of different phases of development, and through a lack of capital reinvestment the mine production has tapered off since the late 1990s. Since the merger with AngloGold in 2004, the decline in production has not been arrested and has actually been a downward trending story for a number of years. The rising gold price through the 2000s masked falling production and rising costs.

Over the last 12 months in particular, AngloGold Ashanti has developed a holistic plan for the mine, covering every facet from production to stakeholder engagement and our environmental plan. Going forward, we plan to reduce the mine’s footprint, which has spread out over a large area over the years. We also have had a large workforce in the mine for quite some time and there is a need to ensure that our workforce is a suitable size for the operation and has the right skills. We are developing a mine design that is appropriate and ensuring that we have the building blocks in place to deliver it.

What recent milestones have you achieved in the revamping process?

MM: We have recently made several important developments at Obuasi. First, we have switched over to an owner development approach as of last November. Prior to this, there was a mining contractor that was operating at Obuasi since the 1920s. For various reasons, they were not able to recapitalize and modernize their fleet. It reached the point where output from the contractors was just not sufficient and we decided to terminate the contract. This was not a simple decision, given the 90 years of history, and we engaged in important stakeholder consultation to ensure that it was done in an appropriate manner.

This enabled us to bring in the international mining contractor Byrnecut Offshore Pty Ltd to develop a primary decline from surface and to slowly but surely modernize the way that we develop, away from a labor-intensive, hand-held method to a fully mechanized method. Byrnecut has been on site since April. In June, we started work on our primary access decline, which will go down to the 50 level, about 1,500 m below surface. This is a 17,000 m capital redevelopment that will allow us to modernize the mining of the ore blocks above and, more importantly, to access the Obuasi Deeps below the 50 level.

A third initiative at Obuasi dealt with the galamsey issue, which had grown quite large over the years mainly in the old part of the mine above the current workings, though infiltrating deeper into our active mining areas as well. We approached government about this issue and they initiated a nationwide program in the first quarter of this year to flush out illegal mining. The campaign has been very successful at Obuasi and we have been able to get rid of the lion’s share of activity. We are still working through the issues to stamp it out completely.

What plans are being put in place to increase production at AngloGold Ashanti’s second producing mine in Ghana, Iduapriem?

MM: Iduapriem is a low grade open pit mine with a similar ore body to Tarkwa. A big part of mining Iduapriem comes down to balancing stripping ratios. Last year, we started up a new pit which is in a slightly different part of the lease and is slightly higher grade. This year production has increased and maintained a profile of over 200,000 oz. The mine is performing well.

Considering the relative maturity of Ghana’s gold sector, what is your outlook on the country’s mining potential going forward?

MM: When it comes to the country as a whole, power is an important consideration. Electricity prices have increased significantly over the years as more industries have developed in the country. The Ghanaian government has a stated objective of doubling the amount of power generated in the country by 2015-2016. This is ambitious but doable with the right focus and investment models. Having stable power, both from a quality perspective and a price perspective, is very important. The other issue in Ghana is the rising cost of labor. African mines in general, not just in Ghana, have higher workforce numbers than the global average and are paying lower than the global average. However there are many hidden costs in employment with many benefits on top of the basic salaries paid. This creates a workforce always wanting more and this is a challenge that is facing the entire African mining industry.

Can you tell us about AngloGold Ashanti’s successful malarial control program, which you are now implementing in other areas of the country?

JO: AngloGold Ashanti’s malaria control program had targeted a 50% reduction of malaria incidences at Obuasi in the first two years of the program, but they were able to reduce the rate by 65-70%. The Global Fund, based in Switzerland, looked at our program and realized that through private participation they can achieve their aim of eradicating malaria. AngloGold Ashanti was given the opportunity to extend our malaria control program to 40 other districts in the country with $130 million of funding over five years. AngloGold Ashanti is the first of example of the Global Fund partnering with a private company.

What is your outlook for Obuasi in the next three years?

MM: In the next three years, we would love to have an Obuasi that has executed its capital program and right-sized its workforce. By that time, we should be profitable and will have risen from our current status as a 4th quartile producer. AngloGold Ashanti also has many non-core assets, such as our hospital, where we have to ensure that we have the right business model because they support not just the mine but also the community.

We have done a lot on the communication front in the last few months to ensure that people are aware of our plans for the mine. We just recently met with more than 800 of the miners’ wives to inform them of what we are doing and to hear their concerns too. We have also recently submitted our draft environmental management to the EPA for the next three years and we will be ensuring that legacies are addressed as well as possible.

This interview was conducted as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.

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