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Bloomberg reports AngloGold Ashanti, the third- largest producer of the metal, is scaling back a $3 billion, 10-year programme to extend is Mponeng mine outside Johannesburg, South Africa.
Mponeng is the world’s deepest mine and extends about 4 km (2.5 miles) underground. To meet an output target of 5.5 million ounces of gold by 2015, AngloGold will speed up expansion outside its South African base where barring technological breakthroughs, gold reserves are too deep to be mined profitably and safely. South African gold miners have to contend with some of the highest cash costs in the industry which at some properties are almost double the global average of $620 per ounce.
The proposal’s duration was “too long and as a consequence the return is not justified,” Chief Executive Officer Mark Cutifani told Bloomberg. AngloGold’s most recent quarterly financial results showed production at Mponeng declined 8% to 117,000 ounces at a total cash cost of $587 per ounce.
Fin24 reported on South Africa’s ultra-deep gold mines in October saying the goal of technological innovation underground not only involves machines that can do the work of humans at the “coalface”, but also means the end of mining methods in standard use for more than a century. AngloGold, and probably all its peers, wants to mine gold without using blasting to break up rocks.
MINING.com reported in June while the average global cost to produce one ounce of gold was $620 in the first quarter, median cost for South African miners were $922/oz and 10% of mines in the country produced gold at an average cost of $1,202/oz.
Read more on South Africa’s gold mine cash costs >>
MINING.com reported earlier this month thousands of people face evacuation from greater Johannesburg in the Gauteng province – the economic heartland of South Africa – due to toxic sludge from abandoned gold mines laced with high radiation levels.
Acid mine water, the result of groundwater flowing through underground shafts, is decanting from an old uranium mine and rising by half a metre a day beneath the city of 7 million people. Mass evacuation of informal settlements is one of several recommendations in a government-commissioned plan drafted in June to deal with 380 acid mine dumps – many of them radioactive.
Uranium is often mined as a byproduct of gold in South Africa and it is estimated that some 800 kilometres of tunnels exist underneath Gauteng left over from more than century of underground mining.
Read more on South Africa’s AMD problem >>
3 Comments
Mike
This article is misleading. AngloGold said it had re-engineered the Mponeng project which reduces the capital outlay by using declines instead of a tertiary shaft system. The production profile is virtually unchanged and the returns on the project much higher. This is good news for all stakeholders, especially shareholders and govt who will get more taxes quicker. The comments on costs are also misleading. For costs ytd, cash costs in South Africa for AngloGold averaged $693/oz, not far off global industry average.
MINING.com Editors
Hi Mike, thanks for your comments. I fail to see how the article is misleading though. Mark Cutifani himself said “the return is not justified” and that the project is being scaled back.
The figures for costs for South African gold miners come from ABN Amro’s study: http://www.virtualmetals.co.uk/pdf/ABNGCQ111.pdf
As stated in the article costs for Mponeng is $587/oz which is indeed less than $620.
allritejack
There is certainly truth in what Cutifani is saying re the technological challenges. However, you can be sure that the problems of mining in South Africa, due to government policies, will be the swing factor driving investment elsewhere. Obviously he dare not reference those issues.