Srinivasan Venkatakrishnan, AngloGold Ashanti
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Sense of urgency in AngloGold's exploration
Allan Seccombe
Posted: Tue, 13 Feb 2007

[miningmx.com] -- THERE is a sense of urgency in AngloGold Ashanti’s exploration programme, which is now focussed on three key greenfield projects to bring six million ounces of gold into inferred resources in 2007.

Over the past six years AngloGold has whittled down its exploration prospects, either farming them out to juniors with the option of clawing back shares in those projects if they prove to be financially viable to mine, or selling them.

It now has this core set of three greenfield projects. They are Tropicana project in Australia, which is most likely to come into production first, the Mongbwalu project in the Democratic Republic of the Congo and a large area in Colombia.
The urgency we have is internal
Total exploration spend in 2007 will be 58% higher than the previous year at $163m. AngloGold will increase the allocation to greenfield exploration by 70% to $86m. The total greenfields exploration drilling will rise 200% to 350,000 metres this year.

“The urgency we have is internal rather than external. We are keen to show reserve generation. Over the past three years our reserves have come down,” said Srinivasan Venkatakrishnan, AngloGold’s chief financial officer.

“On the greenfield projects, you have to form a view on whether they are mineable or not and the quicker you do it the better,” he said.

AngloGold eats through its reverses at a rate of more than six million ounces a year.

In 2006, it grew its reserve base by six percent or 3.6m oz after depletion by bringing in a deepening project at its Mponeng mine in South Africa and an extension of life at Cripple Creek & Victor in the United States, amongst others.

Modelling and a higher gold price have also played a role increasing the reserves. AngloGold used $550/oz in its reserve estimation for 2006 from $400 the year before, bringing 3.7m oz into reserves.

AngloGold has allocated $24m in 2007 to drilling 120,000 metres at Tropicana and Havana in Australia and another $8m on exploring outside these two zones, said Richard Duffy, director of business development at AngloGold Ashanti.

A resource statement should be released for Tropicana before the end of 2007. A bankable feasibility study could be completed during 2008 and production could start from the project in 2010 or 2011, Duffy told Miningmx.

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In the DRC, $15m has been set aside for drilling some 70,000 metres of drilling in the core exploration area and a further 10,000 metres of regional drilling.

AngloGold will spend $15m to drill 40,000 metres of drilling on three areas, including Gramalote and Quinchia, on its copper gold porphyry rich tenements in Colombia that lie between the capital Bogotá and the Pacific ocean.

Its partners Bema Gold and copper producer Antofagasta will add another $15m towards exploration this year.

Colombia has grades of three to four grams a tonne over large widths, which lends itself to opencast mining, while the DRC could yield a mine much like the opencast Geita mine in Tanzania.

AngloGold’s net debt has fallen to $1bn from $1.8bn a year ago because of equity raising and internal cash generation. Its cash holdings swelled by more than R2bn to end the year at R3.5bn.

“There is spare capacity on the balance sheet and one would like to keep it spare,” he said.

“Historically, the constraint has been what cash is available and what will it be spent on. With the gold price where it is at the moment, this is the time frame to exploit it,” Venkatakrishnan said.