When Ghanaian gold producer Ashanti Goldfields decided to merge with AngloGold in 2004 one of the key reasons was a need for capital and technology for Obuasi. That the long term future of Obuasi hinges on its deep level underground potential made it a good fit for a South African-based gold company with such expertise, albeit Obuasi’s orebody is very different to that of the deep level mines in South Africa.

One of the difficulties Obuasi faces is that depletion of surface reserves has seen it reduced to sourcing 90% of its ore from underground. As a result of the drying up of surface reserves, Obuasi, which used to produce over 750,000 ounces of gold a year during the late-1990s, now produces some 400,000 ounces of gold a year.

This year Obuasi is expecting about 415,000 ounces of gold production and over the next three years this will build up to 450,000 ounces a year. The mine also plans to bring down its cash costs from US$350/oz last year to a predicted US$327/oz this year.

Robbie Lazare, who heads AngloGold Ashanti’s Africa underground division, says he would like to see the mine reach a production level of 600,000 ounces in the future at a real cost of US$300/oz, assuming the Obuasi Deeps project comes about.

“In the meantime we need to restructure Obuasi to reflect that it is a 400,000 ounce a year mine.”

The restructuring of Obuasi’s current operations has taken longer than foreseen by the market, but takes into account that Obuasi was starved of capital for three years prior to the merger. In addition, for two years post the 2004 merger a no change agreement was in place regarding aspects of the business at Obuasi. To date US$100 million has been spent on upgrading the infrastructure at Obuasi, which currently mines down to 50 level, 1,640 metres below the surface. In 2005 some 42% of the US$77 million capital expenditure at Obuasi went towards ore reserve development, and in 2006 Obuasi has an overall planned capital expenditure of US$91 million.

Obuasi 1

Underground drilling to
define the Obuasi orebody.

The Africa structure of AngloGold Ashanti, whose operations includes the Sadiola, Yatela, and Morila operations in Mali, the Siguiri mine in Guinea and the Geita operation in Tanzania, all opencast mines, has also changed in a way that reflects the significance of Obuasi. Previously the company in Africa had been structured into regional divisions, East Africa, West Africa and Southern Africa, but the group’s African structure now comprises two divisions – Africa underground and Africa surface operations.

“The divisional structure is now based on competencies,” Lazare says. His counterpart who heads the Africa surface division is Fritz Neethling.

The infusion of technology into Obuasi has brought its mining planning systems into the information technology age. Previously Obuasi’s mining plan was done using spreadsheets, and it is a complicated orebody that requires geological confirmation drilling to avoid dilution. Since the formation of AngloGold Ashanti a lot has been done to improve these systems. The mineral resource management plan has seen a life of mine design undertaken using Datamine and Mine 2-4D. A structural model on the ground conditions is to be completed this year and the development of a resource block model using krieging is probably the most important of the upgrade steps in mineral resource planning.

The restructuring of Obuasi will also see its nine existing surface shafts, of which six are in operation, and three subshafts, of which one is in operation, reduced to four operating surface access shafts and the one subsurface shaft by the end of 2006. Recently Obuasi completed the equipping of the shaft and man winder at the Brown sub-vertical shaft, and it has completed the construction of the mine’s single decline shaft, the Sansu ramp, giving access to all underground mining blocks.

In addition the operation commissioned a US$17 million fridge plant in December 2005 which will decrease the temperatures underground by 3O on average. “The temperature underground used to be 32O and in the rest of the world it would be considered illegal to mine at temperatures above 32.5O,” Lazare says. Research has shown that every 1O improvement in the temperature improves efficiency by 15% to 20%. A total of 168 walls have been built inside the mine to ensure that ventilation goes to the places where mining is underway.

Obuasi 2

Entrance to the Sansu decline shaft.

Obuasi is physically intertwined with Obuasi town, which has a population of about 250,000. The mine hospital saw 6,000 cases last year, of whom 1,900 were employees. AngloGold Ashanti is as a priority spending US$1.7 million this year on a malaria control programme, which was initiated in April 2006. After that it will spend US$1.3 million a year on the programme intended to at least halve the malaria prevalence in the area. Apart from the obvious humanitarian benefit, avoiding lost shifts due to malaria will ensure the programme effectively pays for itself.

Obuasi, predominantly an underground open stope block cave mine, has invested in optimising the use of backfill and improving maintenance and equipment availability at what is a totally mechanised operation. Availability of spares was a problem in the past and the mine has been investing in new drilling machines and other equipment. At the end of April the fleet of some 60 LHDs at Obuasi were running at an availability of 75% and the aim is to raise this further to 90%. The upgrade also relates to the definition of where the orebody is, since unlike the South African operations it is not simply a matter of following the reef.

The orebody at Obuasi, with a strike length of 8 km, can be described as comprising several fingers that dip at an angle of 65O to 70O and the reef, which can reach a thickness of 30 metres, pinches and swells so definition drilling is necessary to determine where this happens. At the end of 2005 Obuasi had a mineral resource of 141 million tonnes at 5.49 g/t for 24.9 million ounces of gold and ore reserves of 49.6 million tonnes at 5.42 g/t for 8.6 million ounces of gold (calculated at a gold price of US$475/oz).

Obuasi, like all capital starved operations, suffered from insufficient development work and at one point had only two months of reserves developed for mining. The target Obuasi has set itself is to have 10 to 12 months of developed reserves. The mine had 1.9 million tonnes of total developed reserves at the end of 2005, of which about half was available reserves. The aim is to have almost three million tonnes of developed reserves by the end of this year, of which some two million tonnes will be available reserves.

Obuasi managing director Danie Spies says the plan is also to have three months of drilled reserves available for mining that is taking place at about 200,000 tonnes of ore a month. At the beginning of 2006 the mine had 2.2 months of drilled reserves available.

Looking at the longer term life of Obuasi, last year AngloGold Ashanti allocated US$45 million to a five year exploration programme of the orebody below 50 level. This includes two long holes from surface to go down to about 3,000 metres at a cost of US$1.7 million per hole. These will supplement historical drill data that exists for between the 50 and 65 levels. There are indicated resources below the centrally located Kwesi Mensah shaft and drilling is expected to reveal a higher grade portion of the orebody below the Adansi shaft to the north. In addition a chamber will be established at 50 level and drilling of the deeper orebody will take place from there. The Obuasi Deeps project is expected to go to the AngloGold Ashanti board after this five year programme, when a decision will be made on the project that will require an investment of at least US$600 to US$700 million. Obuasi Deeps is seen by the company as a project with a 12 year implementation horizon assuming a starting date of 2004.

In the interim a much smaller scale mini Obuasi Deeps project is being studied for feasibility between 50 and 65 levels. This will involve some limited mining, and essentially could be considered a trial mining programme that will give better insight as to what mining Obuasi Deeps would be like.

Obuasi has three plants, these being the Oxide Treatment Plant (OTP) which currently treats heap leach oxides, the Sulphide Treatment Plant (STP) which is the largest of the Obuasi plants and the Tailings Treatment Plant (TTP) which can treat 2.4 million tonnes a year. The OTP, with a capacity of 2.16 million tonnes a year of oxide ore, is only 15 years old and it has run out of ore to process, so Obuasi either needs to find new oxide reserves or convert the plant for the treatment of sulphide material. The STP, which has a capacity of 2.4 million tonnes a year, uses biox technology to treat what is a refractory orebody from Obuasi’s underground.

The STP is improving its filtration to ensure an increase in recovery rate from 82% to 85% by 2007, and considering that sulphide refractory ore is the hardest to process this recovery rate will make Obuasi the best in the world in this field. This plant receives ore with a head grade of 6 g/t and after the upgrade the residual grade will be 0.9 g/t compared with the current 1.1 g/t. The plant will also increase from processing of 180,000 tonnes of ore a month in 2004 to 200,000 tonnes a month by the end of 2006.

Obuasi 3

At an underground workshop at

The TTP has only been recovering oxides to date and a flotation stage to recover sulphates will increase its total recovery rate from 25% to 40%. This upgrade will also be completed by 2007. The aim is to improve the plant further so that the recovery rate goes up to 60%. The head grade into the TTP is 1.8 g/t and at the 40% recovery rate the residual grade will be 1.08 g/t.

Because of the need to find ore for the OTP the company is undertaking exploration for open pit resources over the 632 km2 mining lease as a priority. This exploration commenced at the end of May this year. Targets include the Pampaso prospect, which is a quartz vein type prospect in an oxide environment, located 3.7 km along strike of the old Homase pit. Another prospect is Binsere North West, an oxide prospect in the metasedimentary environment with a strike length of about 4 km and a width of about 300 metres. Further targets are Anyankyirem and the Anyankyirem-Homase gap, the former having with a strike length of 1.7 km and a mineral reserve of three million tonnes at 2.11 g/t for 141,000 ounces of gold in a primary material which is non-refractory and hard. The Anyankyirem-Homase gap prospect is based on a soil anomaly with a strike of about 4 km and width of 250 metres in a metasedimentary host material.

Unlike South African deep level mines where labour is the major operating cost or large open pit gold mines elsewhere where fuel is the major cost, at Obuasi the major operating cost is materials, which account for 38% of this total. Obuasi financial controller Osei Amo Mensah says this is partially due to the lack of a support industry for mining in the country that sees the mine pay a 20% premium on all its imported materials due to freight and duties. “In the past we used a buying agent, but now we will use AngloGold Ashanti’s commercial services department in South Africa to do procurement and eliminate costs,” he says.

Labour accounts for 26% of Obuasi’s operating cost, and power, expensive in Ghana, accounts for 15%.MRA