Bloomberg News

AngloGold Cuts 10-Year Plan to Extend World’s Deepest Mine

November 24, 2011

(Updates with share price in final paragraph.)

Nov. 23 (Bloomberg) -- AngloGold Ashanti Ltd., the third- largest producer of the metal, scaled back plans to extend the world’s deepest mine, saying it’s moving away from larger-scale South African projects to hasten returns and cut risk.

The original proposal’s duration was “too long and as a consequence the return is not justified,” Mark Cutifani, AngloGold’s chief executive officer, said in a telephone interview yesterday. Instead of a $3 billion, 10-year program for a new shaft at Mponeng mine, AngloGold will ask its board early next year to approve using ramps to access deeper levels, Mike O’Hare, the company’s executive vice president for South Africa, told investors.

To meet an output target of 5.5 million ounces of gold by 2015, AngloGold is expanding faster beyond South Africa, its base, where increasingly deep and difficult operations are required to exploit aging ore bodies. The Johannesburg-based company has had success in finding new reserves in countries including Colombia and the Democratic Republic of Congo.

Phased expansion requires less capital, is “a lot less risky and allows us to be more confident as we go along,” O’Hare said. “It may not be the most efficient over a very long period, but certainly over the four-year period it is more effective.”

The South African unit is looking to “maintain a stable base” of around 1.7 million ounces over roughly the next four years, while production in the Americas may more than double to about 1.9 million ounces in 2020, a copy of yesterday’s investor presentation shows.

Australian Production

Australian output could double to about 1 million ounces from 2014 levels “in the longer term.” In the rest of Africa, growth projects will be fast tracked to possibly yield about 3 million ounces by 2020, from between 1.5 million and 1.7 million ounces in 2012-13.

AngloGold has broken up Mponeng’s deepening beyond 2.4 miles (4 kilometers) into four phases. The first, $298 million stage, is under way. A second phase may cost $520 million, according to the presentation, which also shows two further potential extensions.

Cutifani said he did not expect South Africa to introduce a policy of mine nationalization.

The ruling African National Congress agreed last year to study the idea after a call by Julius Malema, its youth leader. Malema was suspended earlier this month by the ANC for undermining party unity, a move that he is appealing.

“My view is that nationalization will not be on the agenda,” Cutifani told investors. “The country can’t afford it. It’s just not practical.”

AngloGold retreated 0.8 percent to 372 rand by 10:16 a.m. in Johannesburg, paring its advance this year to 14 percent.

--Editors: John Viljoen, Alex Devine, Ana Monteiro

To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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