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AngloGold Ashanti to proceed with Tropicana JV with Independence Group

Last updated: 03:20 11 Nov 2010 EST, First published: 04:20 11 Nov 2010 EST

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AngloGold Ashanti Ltd (LON:AGD, ASX:AGG, NYSE:AU, JSE:ANG) and Independence Group (ASX:IGO) have approved the development of the Tropicana Gold Project in Western Australia, the most significant gold discovery in Australia for more than a decade.

AngloGold Ashanti has a 70% interest in the project, which is located 330 kilometres eastnortheast of Kalgoorlie in WA, and Independence Group has 30%.

The approved project will produce 3.45 million ounces of gold over a 10 year mine life at a cash cost of A$710-A$730/oz (US$696/oz-US$715/oz).

In the first three years of operation, gold production will be between 470,000-490,000 ozpa at a cash cost of A$580/oz- A$600/oz (US$568/oz-US$588/oz).

Capital expenditure, including pre-production operating costs, is estimated at A$690-A$740 million (Real) or A$725-A$775 million (Nominal – including escalation).  At current exchange rates this equates to US$676–US$725 million or US$711-US$760 million, respectively.

The higher production rate in the first three years will contribute to accelerated payback.

The Tropicana Joint Venture’s first mover advantage has enabled it to peg the bulk of what is now recognised as a major new gold field.

Construction will begin in the June quarter of 2011 and first gold is anticipated in the December quarter of 2013.

“Tropicana is the first of AngloGold Ashanti’s major gold discoveries to move into production,” said CEO Mark Cutifani. “We’re delighted to give the green light to its development.”

“This is a clear demonstration of the impact an innovative, results-driven exploration program can have on organic growth,” Cutifani said.

“It’s gratifying to be developing our own projects at a time when so many majors are forced to pay huge premiums to fill their project pipelines.”

The decision to commit to development follows the successful outcome of a Bankable Feasibility Study (BFS) based on open cut mining of the Tropicana and Havana deposits.

The BFS does not take into account possible production from the Boston Shaker or Havana Deeps deposits.

The approved project will utilise conventional drill and blast, truck and excavator open cut mining methods carried out by a mining contractor.

The 5.8 million tonnes per annum capacity (fresh ore) process plant has been designed for water and energy efficiency, with the comminution circuit comprising two-stage crushing, high pressure grinding rolls and ball milling, followed by a carbon-in-leach circuit for gold recovery.

The BFS was based on a Proved and Probable Reserve of 48 Mt grading 2.2 g/t for 3.4 million ounces of gold. The BFS mining inventory totalled 59 million tonnes grading 2.0 g/t for 3.8 million ounces.

Whilst the initial mine life is estimated at 10 years, the Joint Venture partners are confident this can be extended.

Significant results were also received from the Havana Deeps prospect, which represents extensions of the Havana mineralised system external to the Havana open pit.

The recently-completed Havana Deeps scoping study, based on drilling data to the end of July 2010, indicates the potential viability of underground mining at Havana Deeps.

Although it is too early to determine the scale or timing of underground mining, it could commence in parallel with open pit mining, once a suitable portal position is available in the open pit.

The company anticipated that Havana Deeps will progress into a pre-feasibility study in early 2011.

Graham Ehm, EVP Australasia, said Tropicana would add to production from the 100% owned Sunrise Dam mine to lift AngloGold Ashanti’s Australian gold output to 600,000 ounces per annum by 2014.

“Tropicana will rank as the fifth largest contributor to the company’s global production in its first three years and will double the operating cash surplus generated by the Australian region," Ehm said.

He said the Project would employ up to 550 people during construction, and up to 450 people during operations, as well as contributing an estimated A$836 million to the WA economy during construction and a further A$825 million during operations.

Infrastructure will include 220 km of new road from Pinjin to the site, a sealed all-weather airstrip and development of a borefield 50 km from the mine site for water supply. The mine will operate on a fly-in, fly-out basis.

Tropicana was approved by the WA Minister for the Environment, the Hon Donna Faragher, in October. Approval by the Federal Minister for Sustainability is anticipated by the end of the year.

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