AngloGold to expand Cuiaba gold mine

The directors of AngloGold Ashanti (AU-N) have given the green light for a US$121-million expansion of the company’s wholly owned Cuiaba underground gold mine in south-eastern Brazil.

The expansion will allow annual production to increase from the current rate of 190,000 oz. to 250,000 oz. at a cost of US$169 per oz. over the life of the mine, which will be extended by six years to 2019.

Efforts will centre around deepening the mine to access the Serrotinho and Fonte Grande orebodies, located below the existing mine workings which account for 60% of the total mineral resource at Cuiaba.

Workers will extend the ramp from its current depth at level 11 to level 21, the deepest point at which surface drilling has intersected the main orebodies.

A resulting increase in mining volume will be accomodated by upgrading the main shaft’s hoisting capacity and building new milling and flotation facilities at surface.

Flotation concentrate will be transported via an existing, 16-km aerial ropeway to a treatment plant at Queiroz, where another roaster and acid plant will be built and the current leaching facilities upgraded.

The existing milling and flotation facilities at Queiroz will be decommissioned.

The deepening project is already underway and AngloGold expects to commission the expansion in December 2006, and then ramp up to full production by mid-2007.

The company believes that the deepening project, once completed, may also provide an opportunity to exploit narrow-vein orebodies both below level 11 at Cuiaba mine as well as at the nearby Lamego high-grade gold deposit.

AngloGold says its conceptual studies have “highlighted the potential to extract significant value from these areas,” which would otherwise be sterilized.

Drilling at Lamego last year confirmed multiple mineralized horizons at the southern extremity of the Cabea da Pedra fold hinge, and the company extended the Carruagem exploration ramp another 227 metres during the fourth quarter to 242 metres.

Commenting on the Cuiaba expansion, AngloGold Ashanti CEO Bobby Godsell said: “This decision confirms the view that Cuiaba is a world-class, long-life mine and is consistent with our value-adding strategy of growing the company through discovering or acquiring new assets or expanding existing operations.”

From its AngloGold Ashanti Brazil subsidiary (which includes Cuiaba and the Corrego do Sitio heap-leach mine), AngloGold produced 240,000 oz. gold in 2004 at a total production cost of US$191 per oz., comparable to the previous year’s output of 228,000 oz. at a cost of US$199 per oz.

Operating profits in 2004 from the subsidiary totalled US$45 million on gold income of US$87 million, compared to profits of US$37 million on income of US$80 million in 2203.

At Corrego do Sitio, exploration drilling at Carvoaria Velha-Bocaina (situated 2 km north-east of Cachorro Bravo) confirmed the presence of multiple, narrow, locally high-grade, mineralized sulphide horizons.

Additional drilling at Bocaina, at the northern end of the Corrego property, has extended the known oxide resource to the north and confirmed the down-plunge continuity of sulphide mineralisation. Ongoing underground drilling at Cachorro Bravo continues to intersect high-grade mineralisation within the 300 ore horizon.

AngloGold Ashanti also has a half interest in the Serro Grande gold operations in central Brazil, from which it produced an attributable 94,000 oz. gold at a total production cost of US$178 per oz., compared with the year-earlier results of 95,000 oz. gold at US$163 per oz.

Company-wide in 2004, AngloGold Ashanti produced 6.05 million oz. gold at a cash cost of US$268 per oz., up 8% from 2003 owing to the merger of AngloGold with Ashanti Goldfields.

While Brazil represented only 4% of AngloGold Ashanti’s global asset base of US$8.2 billion and 5.5% of its gold production in 2004, Brazil was punching above its weight class by accounting for 14% of the company’s US$787-million operating profit.

Overall, AngloGold’s year was dominated by the comprehensive restructuring of the company’s hedge book and the relative underperformance of the large Obuasi underground gold mine in Ghana, formerly Ashanti Goldfields’ flagship mine.