Mining giant AngloGold Ashanti has given indication it will begin operation of its Obuasi Gold Mine soon after reaching an agreement with government for the redevelopment of the Obuasi Gold Mine, turning it into a “modern productive mining operation.”

AngloGold is expected to invest an initial US$500million in bringing Obuasi back to producing and profitable mine operation over the first two and a half years, with first gold pour expected in the third quarter of 2019.

The agreement also includes a development agreement, and a tax concession agreement which is awaiting parliamentary approval, as well as a security agreement and a reclamation security agreement while environmental impact assessment is completed as well.

AngloGold suspended at the Obuasi underground mine since 2014, due to significant fall in gold prices and a prolonged period of significant losses.

This led to significant retrenchment, living the mine in “limited operating phase.”

The redevelopment project, according to managers of the mine, will consist of two distinct phases, with stage one comprising project establishment, mine rehabilitation and development, as well as plant and infrastructure refurbishment to enable production at a rate of 2,000t per day for the first operating year.

The second phase includes refurbishment of the underground materials handling system, shafts and ventilation; and construction of the primary crusher, the SAG/Ball circuit, carbon regeneration, a new gold room and tailings storage facility, which will enable the operation to climb to 4,000t per day and then ramp up to 5,000t per day.

Speaking to the B&FT, the General Manager of AngloGold Ashanti, Obuasi Mine, Mr. Eric Asubonteng, expressed excitement at the resumption of work.

“Redevelopment of the Obuasi mine will establish Obuasi as a world class operation. Let me say that, we have been meeting the various stakeholders and we are now ready to begin operations in Obuasi as we have the mine and labour plan, geological understanding and social model to match its world-class, high-grade ore body. It is good news for Ghana.

He added that having secured the current agreement also signifies the government’s commitment, especially the Minister of Mines and Natural Resources, to enabling the mine at Obuasi to restart as a modern, productive, long-life high margin operation.

“AngloGold Ashanti will develop Obuasi as a mechanised underground mining operation, a fundamental departure from how the mine was operated in the past. The redevelopment makes use of automation and controls for improved operational efficiencies and consistency in performance,” Mr Asubonteng said.

With a mining life of 21 years, Obuasi has reserves of 5.8 million ounces and will operate at costs lower than AngloGold’s current average, Mr Asubonteng said, pointing out that the mine is now moving from owner mine to contract mining.

When asked why contract mining, the Managing Director and General Manager of the mining giant said, “the decision to go contract mining is not a subject to any agreement with government and one of the reasons is as a result of lack of the right skill set for the kind of mine AngloGold was going to be operating [Mechanised underground mining operation].”

International Media outlets like Blomberg had earlier reported that, “AngloGold agreed in October to sell its South African mines to Harmony Gold Mining Co. and a Chinese investment firm that will halve the company’s production in its home country. The South African operations had dragged down AngloGold’s performance as aging infrastructure, reserve depletion and accidents raised costs and reduced production.

Headline earnings, which exclude some one-time items, fell to US$27 million for 2017 compared with $111 million a year earlier. AngloGold rose 0.2 percent by 9:40 a.m. in Johannesburg. The stock has fallen 5.9 percent this year.”

He added that, AngloGold intends to go it alone on the re-development of the mine and that there was no JV partner to share the cost.

Turning to the issue of illegal mining, Mr. Asubonteng commented thus: “obviously, we are seeking a commitment on security. The government has already taken steps to ensure security not only at Obuasi but across all Ghanaian mining operations. There are no longer any illegals at Obuasi and the government has taken a clear view that they would rather support structured large and small-scale mining as opposed to illegal mining.”