AngloGold Ashanti (AGA) says the over $500 million spent on the Obuasi mine during the four years that it remained shut is due to the firm’s confidence in Ghana’s mining sector.
Managing Director of the AngloGold Ashanti, Eric Asubonteng, said there exist viable opportunities in the sector, especially at its concession at Obuasi in Ashanti Region.
“What has been missing over the years has been how to get value out of that. Our challenge going forward is how to turn the world-class Ore Body into a world-class mine and how we operate the mine is going to determine how we do it,” he said on Wednesday.
AngloGold Ashanti suspended operations at the Obuasi underground mine in 2014, due to a significant fall in gold prices and a prolonged period of losses.
Photo: The mine was re-opened on Tuesday, January 22, 2019, at a colourful event.
President Nana Addo Dankwa Akufo-Addo re-opened the Obuasi mine during a colourful ceremony, in fulfilment of a campaign pledge and promised to stop encroachment by illegal miners on the concession.
Encroachment on AngloGold Ashanti’s concessions had been one of the major causes of the firm’s prolonged losses.
The mining giant then resolved to shut down the mine, retrenched over 4,000 workers and initiated a “limited operating phase.”
Post-shutdown investments
Speaking on current affairs programme PM Express on MultiTV, Mr Asubonteng said the four-year shut was important to give AngloGold Ashanti a clear view of how to fix the then-troubled mine.
“We had gotten to the point where we couldn’t fix the mine on the run. The example I always use is trying to fix the wheel of a vehicle while it is in motion,” he explained on the nightly current affairs programme.
He said in stopping the mine and retrenching the over 4,000 employees it cost the firm over $240 million.
“It was mainly severance package…that could buy several mines in its own right. But we had a commitment and we have values as a company and we can’t let employees go without meeting our full obligations so we did that very smoothly.
“After that, we had to spend money to conduct a feasibility study to determine first if the mine is viable to be resurrected and secondly if so how [we] going to do it?” he said.
Another problem that managers and shareholders of the mining giant had to resolve was finding the most suitable operating model that will guarantee returns.
While all these were going on, the mining firm did not renege on its environmental and social obligations “so we continued to spend between $50 million to $60 million a year just to make sure we maintained the infrastructure of the mine so that we don’t flood the mines; because once we flood the mines it becomes extremely difficult to re-open it so we had to spend all that money to ensure that it continues,” Mr Asubonteng.
He said: “All the key things that we support the community with, for instance, the hospital we run, the school we operate, the AGA Malaria Control Programme all continued during this phase even though we weren’t producing. That is how come we were spending between $50 million to $60 million a year.
“We did also keep an employee size of about 300 just to keep these programmes going so it cost a lot of money.”
Going forward
The investments to redevelop the mine, the AngloGold Ashanti MD said, are even bigger.
“We intend spending about $800 million to $1 million over an initial period of about six years.
“So this is big sums of money and if we didn’t believe in the jurisdiction we are operating in, in terms of the comfort we get from the business environment, obviously we wouldn’t be making such big investments,” he said.
With a mining life of 21 years, Obuasi has reserves of 5.8 million ounces.
The mine will now operate on the contract mining model, moving away from the previous owner mine model.
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