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What Future Growth Options Does AngloGold Really Have?

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Siguiri

At its Siguiri gold mine in Guinea, AngloGold Ashanti (AU) is planning to invest about $115 million over the course of two years. This project will add a hard-rock plant to the current processing infrastructure. It will also provide the company with the ability to develop the significant sulfide ore potential that exists at the site.

During 1H16, AngloGold reached an agreement with the government of Guinea on the legal and fiscal framework covering the life of the project.

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Sadiola expansion

The company’s Sadiola mine, located in southwest Mali, West Africa, is 41% owned by IAMGOLD (IAG), 41% owned by AngloGold Ashanti (AU), and 18% owned by the government of Mali. The existing plant at this site was not meant for handling hard rock processing. Now, as the mine is nearing the end of its supply of soft rock, an expansion is necessary.

The expansion of the Sadiola mine, which would accommodate the processing of sulfides underneath the existing oxide pits, has the potential to add up to ten years to the mine’s life. It could be a good organic opportunity for the company as well, as it could add 120,000–160,000 ounces of gold per year to IAG’s production profile. It would also lower operating costs from current levels.

The timing of the project, however, is conditional upon the government of Mali’s renewal of construction and operating permits. Items like the power agreement and fiscal terms related to the project also need to be worked out before work on the project can begin.

Opportunity at Colombia

Colombia remains a long-term focus area for AngloGold. It is committed to complete the update of the pre-feasibility studies for the Gramalote and La Colosa projects by the end of next year. The successful completion of these studies should enable the company to declare reserves.

Other miners (RING) (GDXJ) such as Eldorado Gold (EGO), Coeur Mining (CDE), Yamana Gold (AUY), and Kinross Gold (KGC) are meanwhile trying to expand their production through organic growth opportunities.

In the next part, we’ll discuss AngloGold’s cost performance in 1H16.

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