Revealing this in an exclusive interview with Mining Review Africa, executive officer – Africa underground region – Robbie Lazare, confirms that current uranium production of 1.3 million pounds per annum will increase incrementally each year, but will jump to over 2Mtpa in three years’ time.
A global gold producer with 21 operations on four continents, AngloGold Ashanti has a substantial project pipeline and an extensive, worldwide exploration programme. It published South African underground resources of 89 million ounces and reserves totalling 27 million ounces in 2006, and is listed on the New York, Johannesburg, Ghanaian, London and Australian stock exchanges, as well as the Paris and Brussels bourses.
“We believe there is a major opportunity here,” Lazare insists. “A few years ago the uranium price was below US$20 per pound, a year ago it was US$65 per pound, and more recently it has fluctuated anywhere between US$80 and US$130 per pound. Current predictions are that there is going to be an international uranium shortage for the next 15 years, so we are actually in a very good position to capitalise on what that shortage will do to the market price going forward,” he points out.
“The main contributor to the sharp future increase in our uranium production will be Kopanang mine,” Lazare informs. Situated on the Free State side of the Vaal River, the mine is expected to continue its solid gold performance, producing 430 000 to 440 000 oz pa over the next few years. As far as the uranium plant is concerned, “we have obtained initial funding, prior to seeking board approval and funding for the full project in April 2008,” he reveals. The cost of the full project will only be revealed when it goes to the board.
“Currently Kopanang produces a small quantity of uranium as Great Noligwa and, to a lesser extent Moab Khotsong, are responsible for the bulk of current production,” Lazare continues.
“We will start with construction on the Kopanang uranium project on pre-funding within the next month, and it is scheduled to be fully operational in 2010,” he adds.
FURTHER URANIUM OPPORTUNITIES
“There are also further opportunities in respect of uranium that we are investigating,” Lazare states. “We have major surface sources in terms of slimes dams – specifically in the West Wits area – and there is certainly an opportunity there in terms of bringing those resources to reserves. We are busy looking at this option, but we are only in the scoping phase in terms of the potential slimes dams uranium sources in the West Wits area,” he points out.
“The Carbon Leader reef at West Wits contains what we think at this stage is viable uranium content,” Lazare contends, “and we are busy looking at synergies in the region. There is no indication of finality in terms of grade at this stage.”
“We have seen the uranium price recently shooting up to US$130 per pound, and dropping back down to US$80 per pound. We took this into account when we looked at capital projects, adopting a more realistic – even conservative – approach,” he says. “The fact that the projects – even with a conservative uranium price – remain very robust tells you that potentially we have an asset here that is going to make a major contribution to our future profitability,” he emphasises.
“So overall we are on track with where we wanted to be in terms of uranium production, and we are really quite excited about it,” Lazare enthuses. “There are critical decisions to be taken in the future in terms of global warming, and I think uranium is going to play a critical role in terms of those decisions. So we are very excited about the outlook for our uranium assets, and we do have very good uranium assets, but this is not in the short term.”
SLIGHT DECLINE IN GOLD PRODUCTION
Reverting to AngloGold Ashanti’s main business of gold, Lazare contends that all South African mining companies are experiencing a decline. Total gold production for the group in 2007 is expected to be around 5.8 million ounces, while South African operations are expected to produce around 2.5 million ounces. “In terms of our South African operation you will see a slight reduction in gold production with a flattish profile over the next three years – this will be followed by the next phase which will see reductions at certain mines,” he explains. “Our mines are coming to the end of their lives, and this poses the big question in terms of the future – how are we going to replace this production?”
AngloGold Ashanti has three major capital projects in terms of going deeper below its current infrastructure – as well as two longer-term opportunities. The three capital projects are due to reach full production between 2012 and 2015, providing new production of 750 000 oz pa.
“We’ve got the new Moab Khotsong mine, which is building up its production profile at the moment,” Lazare points out. “By 2012 it will be producing 450 000 ounces from its present level of just under 96 000 ounces. This is an asset which is now out of its capital phase and is a normalised mine operation in terms of building up its production,” he adds.
“Over the longer term, we have the Tautona Below 120 project – mining from level 120 to 126 at 3.9 km underground” Lazare continues. “Although this project was approved three years ago, it is only now beginning to pick up speed. Up to now all concentration has been on putting the infrastructure in place, but we have reached the stage where first blasting on the twin decline is taking place,” he reveals. “We are scheduled to start producing in 2011, and to reach full production of 120 000 oz pa by about 2014.”
Third is the Mponeng Below 120 VCR project. Approved at the beginning of this year it will involve sinking of four decline shafts down to 128 level. This project will only start producing in about 2015, extending the life of mine by ten years to 2028. The average production over life of mine will be about 180 000 oz pa.
POSSIBLE NEW PROJECTS WORTH R10 BILLION
“In addition to these three capital projects, we are busy with feasibility studies on two other major projects in South Africa,” Lazare reveals. “If these both lead to decisions to mine, the combined capital expenditure involved is expected to be well in excess of R10 billion,” he estimates.
First of these is the Carbon Leader Below 120 project at Mponeng. “This project calls for mining down to 145 level, which would make it the deepest mine in the world,” Lazare contends. “All our mining here to date has been in the VCR reef, but the Carbon Leader reef at Mponeng is 900m below the VCR reef,” he explains.
“This is a major project,” Lazare insists, “it is like a new mine under the existing one, going down 4.5 km underground. We are busy with pre-feasibility and going into feasibility at this stage, and the intention is to take the project to the board for approval during the course of the final quarter of 2008,” he predicts.
“As far as production possibilities are concerned, “we are quite excited by the grades that we are finding,” says Lazare. “I can’t give you the exact grades right now, but we have a drilling programme underway, and the grades are holding up in the lower sections of the mine. Cost of such a project will be calculated in the feasibility study,” he informs, “so I cannot be precise at this stage. What I can say as an example is that the cost of putting in a mine like this down at 100 level-plus can be anything up R8 billion, although this project at Mponeng will not be that high,” he calculates.
MAJOR SAFETY AND TECHNOLOGY CHALLENGES
“This is deep level mining, and of course we have to address major challenges in terms of both safety and technology,” Lazare admits. “Deep mining in that higher risk environment in a less labour-intensive manner is a major challenge we face in terms of narrow reef mining,” he continues. “We do not have the answers yet, but we are not going to build our feasibility around some untested, untried method. The feasibility team needs to work on improving existing mining methods,” he adds “We are quite excited about this project,” Lazare confirms. “Without specifying grade numbers, I can tell you as an indication that, within the current gold price environment, I wouldn’t touch these projects on a grade of less than 18 to 20 g/t,” he claims.
“The other project we are busy with in terms of completing a pre-feasibility study and moving into a feasibility study is Moab Khotsong Phase 2 – the project we call ‘Project Zaaiplaas.’ We hope to take this one – which involved declines, not shafts – to the board in the final quarter of next year as well,” he says
“There’s more of a sense of urgency in terms of the Mponeng project,” Lazar explains. “But they are both significant projects, and we need to get both of them on line as soon as possible – we would not like the gap between the two to be more than about six months. The other issue is of course availability of capital, bearing in mind that the combined capital expenditure involved is likely to exceed R10 to R12 billion. Cash flow will determine when we start with these projects,” he adds.
“Such expenditure might sound extravagant, but bear in mind that we are talking about extending mining to 2040,”he says. “However, the life extension to 2040 needs to be considered against the likely sizeable capital costs, which the board will need to take into account in the context of total company capital requirements,” Lazare emphasises. “Another positive factor is that the Moab Khotsong project has a nice uranium by-product component, which has major influence in terms of your costs,” he says.
Closing with a general perspective on the overall future of gold mining in South Africa, Lazare points out that South Africa has a total of 40 000 tonnes of gold resource, of which only 15 000 tonnes can be mined through the existing infrastructure. The reality is that the other 25 000 tonnes can be mined only by extending the current infrastructure.
“So the future of gold mining in South Africa revolves around deepening,” Lazare concludes. “Making these projects viable in the future is what presents us with so many challenges in terms of cost management, safety and productivity.”