[miningmx.com] – ANGLOGOLD Ashanti said its western Australian prospect, the proposed 470,000 ounce to 490,000 oz/year Tropicana project, would come in 11% more expensive to build than estimated in 2010.
Mark Cutifani, CEO of AngloGold, blamed the capex hike on “significant increases in construction labour costs and decreased productivity which resulted in higher on-site labour requirements”.
“The West Australian construction market is overheated and this, along with extreme skills shortages, has impacted labour productivity and subsequently costs,’ said Cutifani in a statement to the JSE.
AngloGold said, however, that the increase in capex was “in line with new estimates consistent with the top-end cost range flagged at the time of approval.”
Nonetheless, the capital increases are unwanted, especially as the gold producer said in November that it was looking to conserve cash, although in this respect, the costive approach was aimed specifically at its South African and African operations.
“We have to manage every discretionary dollar,’ said Cutifani at the time. The group announced capex for the year would come in at between $2bn and $2.1bn after having slashed its capex bill $200m.
Although not apparently a risk for AngloGold at this stage, over-spending on projects have cost the world’s leading mining companies dear in impairments.
Rio Tinto wrote-down up to $14bn in assets recently while Anglo American said its Minas Rio iron ore project in Brazil would be impaired by about $4bn.
Xstrata and BHP Billiton have also written down assets in the last 12 months while in the gold sector Kinross Gold wrote down nearly $2.5bn on its Tasiast gold project in Mauritania, a development that cost CEO at the time, Tye Burt, his job.
Cutifani praised his team for containing costs at the Tropicana project. “Even in this environment the team has done very well to contain project costs through tight
scope and schedule control, in contrast to many other resources projects currently in
construction,” he said in the group’s announcement.
Tropicana, in which AngloGold has a 70% stake (30%: Independence Group) is forecast to have gold output in the first three years of between 470,000 oz to 490,000 oz at cash costs of between A$590/oz to A$630/oz, a slight increase on earlier cost forecasts owing to higher fuel prices.
At approval, Tropicana had a life of 10 years and exploration success has extended this to more than 11 years. On a 100% basis, the mineral resource of the prospect has increased to 118 million oz.
“Pre-commissioning will begin in the third quarter leading to the commencement of
production and production ramp-up in the fourth quarter,’ Cutifani said.