Accra, April 16, GNA - Anglogold Ashanti is to invest about 700 million dollars to begin deep mining operations at the Obuasi Mine to maximize mining activities in the area.

The move, which is also geared toward expanding the underground work at Obuasi, would increase the current target to 250,000 tonnes per month.

Mr Robbie Lazare, Officer in-charge of Africa Underground Mines, in a presentation on the operations for 2007 production year said in 2006, 387,000 ounces of gold was produced at Obuasi slightly below that of 2005 with total cash cost 15 per cent higher to 395 dollars as a result of lower yields.

He noted that there were tremendous opportunities at Obuasi but the mine had recorded negative cash profile, which made mining unprofitable. Mr Lazare pointed out that the decision to invest huge sums of money in Obuasi in the next three to four years was a "big one" and they ought to be circumspect to ensure efficiency and cost effectiveness. He noted that gold price and cost of mining input rose simultaneously, putting pressure on profit margins of industry as a whole but Anglogold Ashanti had long focused on managing down fixed cost base through rigorous savings programme.

"Including the 2006 contribution of 73 million dollars, this programme has yielded close to 300 million dollars in sustainable cost savings for the company over the last year," he added. Mr Lazare said based on the 2007 forecast, the company should be the lowest cost major gold producer.

He stressed that with the motive to grow forward, the company remained committed to active management and restructuring of the hedge with focus on optimizing value while reducing the hedge delta. "In current high price environment, received price for 2007 is likely to be 8-10 per cent below the spot gold price", he added. Mr Lazare indicated that in 2006, lost time injury and fatality frequency rates represented a deterioration of what had been an improving trend.

The company responded by adopting excellent safety performances from several operations including Cripple Creek and Victor in the US, which had run for three years without a lost time injury and this reduced fatality rates.

Mr Lazare said at the Iduapriem mines in Tarkwa production decreased by four per cent to 167,000 ounces following a series of mill and crusher breakdowns.

"Plant expansion to increase treatment capacity at Iduapriem from 3.7 million tones has commenced and is expected to be commissioned late 2008."

He said the energy crisis was adding additional cost to production and to remain in operation the company was investing 40 million dollars to generate power.

He said other challenges were illegal mining, water shortage and further right sizing, among others. 16 April 07