JOHANNESBURG – The amount of gold buried at Ghana’s Obuasi mine,
an operation dating back to 1897, is so vast the site may hold four
times current declared reserves, said Randgold Resources Ltd., the
London-listed producer that’s agreed to help turn the project around.
Randgold, working on plans to rebuild the AngloGold Ashanti Ltd. mine,
identified 6 million ounces of reserves at 8 to 12 grams a metric ton,
Chief Executive Officer Mark Bristow said, compared with the estimate
now of 5.6 million ounces at 6 grams of gold a ton.
“It’s still early days but the potential is probably
20 million ounces,” Bristow said. “The problem with Obuasi is 100 years
of legacy all round. Can you convert this world class ore body into a
world classmine?”
Randgold signed a deal last month to work on the
revival plans. It rejected a proposal during months of talks to partner
on all of AngloGold’s African operations, Bristow said.
Randgold’s shares have climbed 0.7 percent this year,
compared with a 13 percent decline in the 15-member Bloomberg
Intelligence Senior Gold Valuation Peers gauge.
Costs spiraled
AngloGold fired most of the mine’s workers and placed
it on limited operations after costs spiraled to more than $1,500 an
ounce and output shrank. The two companies want to rebuild the mine
as a mechanized operation, producing as many as 550,000 ounces of gold a
year. Gold added 0.3 percent to $1,172 an ounce by 7:45 a.m. in London.
Randgold relocated workers from its Kibali joint-venture with AngloGold in the Democratic Republic of Congo to produce the mine
plan, Bristow said. The operation will have to give Randgold a 20
percent return with gold at $1,000 an ounce and pay for historic
environmental liabilities. The company will finish the plan or walk away
by Feb. 18.
It will get a 50 percent stake in the future
operation, fund half its capital expenditure and take on environmental
liabilities if the plan is agreed by AngloGold and the Ghanaian
government, Bristow said.
“For us to do it, we’re going to have to create so
much value,” he said. “We don’t want to pay for the value we’re going to
create.” Capital expenditure won’t exceed $1 billion, split 60-40
between investment on building and sustaining the operation, Bristow
said.
©2015 Bloomberg News
