Low ore hits Obuasi Mine

Accra, Nov. 29, GNA - The Management of AngloGold Ashanti (AGA) says it is facing severe production cost challenges operating its Obuasi mine, quoting current low ore grades as a dampener to making the mine break even, a situation which already has seen 556 workers heading home this year.

The company said it was keen on starting its Obuasi Deeps Project that would take ore production levels beyond 50 to 80 feet where grades have been listed to be about 16 grammes per tonne.

"We can make good grades below the 50 feet level. Then Obuasi would start living again," Mr. Robbie L. Lazare, Executive Officer Africa Underground Region said.

He was addressing a road show in Accra attended by chiefs from the Adansi traditional area, government representatives, industry and business operators, the financial reporters and financial experts. The event chaired by Ms Joyce Aryee, Chief Executive of Ghana Chamber of Mines, was meant to bring them abreast with trends at Obuasi and how to initiate the Obuasi Deeps Project.

Mr Lazare said the mine, which was 110 years old, still had the potential of making a tremendous turnaround if it was able to reverse the about 100 dollars an ounce loss it was making from the Obuasi production.

He said if the Obuasi mine, which used to contribute the biggest share of the Group's production but was now putting in the least, could break even, "we will easily continue with most of our programmes, sustain feasibility studies and the leaching programme, among other major forward moving decisions=94.

Mr Lazare denied claims that the Obuasi mine could be closing down, but confirmed that 1,154 workers were heading home. He said 556 had already received their letters as part of the first phase of a labour restructuring programme due to the unprofitability of the mine because of high operating costs.

Obuasi's ores are reputed to be eight grammes per tonne, "but needs to move up to 16 grammes per tonne from the programmed Obuasi Deeps Project set to take off next year."

AGA says it is spending 200 million dollars on developing the Obuasi Deeps Project and would require one billion dollars to make that significant turnaround to put Obuasi back on the AGA top list. AngloGold Ashanti reported a third quarter financial performance in line with that of the second quarter, with adjusted headline earnings sticking at 141 million dollars or 0.51 cents per share.

Production was still at 1.4 million ounces of gold, with total cash costs up two per cent to 311 dollars per ounce due to lower grades, the annual South African wage increase and higher power costs in Ghana and South Africa.

For the quarter, AngloGold made 584 dollars per ounce, six per cent below the average spot price. This, though low, is reported to be well within the company's forecast range of five per cent to 10 per cent below spot, as it continues to deliver into the hedge book as fully as possible.

At the end of the third quarter, the hedge delta was 296 tonnes or 9.5 million ounces, marking a reduction of 635,000 ounces as compared to the previous quarter's reported hedge delta.

On the way forward for the Obuasi mine, Mr Lazare said the mine was undergoing re-engineering while ensuring an effective management that would turn things around for the mine.

He said a 100-megawatt power generating set costing 35 million dollars would arrive soon to arrest the debilitating energy crisis that is negatively impacting on production targets. The generating set would be installed at Tema.

He said negotiations were underway with government and the Volta River Authority on an agreeable pricing mechanism. Ms Aryee said the Obuasi mine should be supported to regain its former glory, as it still had a potential.

She said a lot of investment would be required to make the move and expressed the hope that the financial sector both at home and abroad would lend a hand.

Commenting on galamsey operations, Ms Aryee said government should ensure that they worked in dignity and safety, arguing that it was wrong for them to take over people's concessions.

Nana Bawuah Kotokuo, Chief of Sansu, which houses one of Obuasi's major plants, expressed disappointment that several discussions on how the mine could support the community had not succeeded.

He cautioned Anglogold Ashanti to stop negotiating with WACAM on behalf of the people of Adansi and Upper Denkyira, saying, "We are capable of thinking for ourselves."