February 20, 2018 / 9:54 AM / 2 years ago

UPDATE 1-AngloGold to revive historic Ghana asset after illegal miners ousted

* Obuasi had been invaded by army of illegal miners

* Study has concluded mine can be brought back from the dead

* Operation will now be modern and mechanised

* Company posts lower earnings (Recasts with Ghana mechanisation plan)

By Ed Stoddard

JOHANNESBURG, Feb 20 (Reuters) - AngloGold Ashanti will spend up to $500 million to mechanise its Obuasi mine in Ghana, capping a dramatic saga for an asset rendered worthless when it was invaded by thousands of illegal miners.

The company announced last year that Ghana’s military had cleared out the illegal miners, who had numbered up to 12,000 at one point, from Obuasi in the Ashanti region.

This paved the way for the company to carry out a feasibility study to see if fresh life could be breathed into the century-old mine.

The study concluded Obuasi could be revived, not as a conventional, labour-intensive mine but as an automated operation — the latest pivot to mechanised mining in Africa.

“Obuasi now has the mine and labour plan, geological understanding and social model to match its world-class, high-grade ore body,” said AngloGold CEO Srinivasan Venkatakrishnan, known as Venkat.

He was speaking after AngloGold posted lower annual earnings on Tuesday, hit by restructuring costs and $46 million in provisions for an expected settlement in a class-action suit related to a fatal lung disease. As a result, adjusted headline earnings amounted to $9 million versus $143 million last year.

The first gold pour from the newly refitted operation is expected in the third quarter of 2019 and while AngloGold is open to partners, Venkat said the company could afford to go it alone for now.

“The redevelopment will establish Obuasi as a mechanised underground mining operation .. The redevelopment makes use of automation and controls for improved operational efficiencies and consistency in performance.”


The move will complete a transformation for Obuasi, where production began over a century ago with barefoot miners boring into the rock face with hand-held drills.

From a workforce that numbered as many as 9,000 two decades ago, the new mechanised operation will employ 2,000 to 2,500.

Production is expected to average 350,000 to 450,000 ounces a year in its first decade as a mechanised operation, close to 10 percent of the group’s current global output of 3.75 million ounces.

Venkat told Reuters that the ore body lent itself to mechanisation because it is high-grade and wide enough to be accessed by machines.

By contrast, South Africa’s unforgiving geology makes mechanisation far more difficult and often impossible. Venkat also said provision had been made to accommodate artisanal miners in the area who have been plying their trade for centuries in a country once known as the “Gold Coast.” An unknown quanity of gold had been pilfered from the operation. “The government has taken a very clear view they are happy to encourage artisanal mining but it has to be permitted,” Venkat said.

“We have given up a large chunk of the concession for the government to enable small-scale mining to take place separately away from where we are operating,” he said.

In South Africa, a class action suit brought against gold producers is likely to be settled “within months” with 9 billion rand ($767 million) going to sufferers, the chair of an industry group said earlier this month.

The suit was launched almost six years ago on behalf of miners suffering from silicosis, a fatal lung disease contacted by inhaling silica dust in gold mines. ($1 = 11.7339 rand) (Editing by Keith Weir)

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