Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti Obuasi update. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star and then zero. Please note that this call is being recorded. I would now like to hand the conference over to Stewart Bailey. Please go ahead, sir.
Thanks, Irene, thanks everybody for joining us at such short notice today. I would direct you all on our website is a very short presentation under the presentation section, just with a schematic that Graham may refer to during the call, a safe harbor statement in it, which covers some forward-looking information and other important information that you should please look at. I'm going to hand over to Christine for just some opening remarks and then to Graham to talk through the detail of the release that we put out today, and then to take your questions. It'll be a very brief presentation up front. Christine?
Thanks, Stewart, and good day, everybody, and thank you for taking the time to join us on the call. Unfortunately, we've had to announce that mining operations at Obuasi have been suspended due to a fall of ground incident that occurred on the 18th of May. Our top priorities right now are the search for our missing colleague, and we are providing support to his family. Due to the nature of the incident, we took the decision to voluntarily suspend all mining activities, and Graham will take you through the incident shortly. At this point, we are prioritizing the safety and wellbeing of our employees at the mine while effectively managing the effects on business continuity. With that, I'll hand over to Graham, who will provide some details of the incident.
Yeah. Thank you, Christine. Firstly, I might just refer to the slide presentation. Some of you will have seen this before, or probably most of you have seen this before. It's a long section of the Obuasi mine. To the left of the slide is the southern part of the mine operating footprint, and to the right is the northern area. The area that we commenced mining in the redevelopment project is to the left or the south, and it is around the KRS shaft, and it's associated with the new Obuasi deep decline that you can see sketched on that diagram. This incident occurred in a narrow hanging wall ore body in the hanging wall of Block 8 lower. We commenced mining in the Sansu area to the extreme left on that diagram, and then we commenced mining down in the Block 8 lower area.
The incident I describe is a narrow ore body, which is in the hanging wall of the main Block 8 lower ore body. Night shift in the early hours of the morning, there was a crew of three and a IT operator were carrying out QAQC work on the 2901 level. Two operators were in the IT basket, and they were tensioning cable bolts or ground support bolts. The leading hand, our colleague, he was in front of the loader directing the work. As the crew were working, the ground below our missing employee gave way and collapsed, and our colleague was drawn into that collapse. Early indications are that the incident was likely caused by the failure of the sill pillar.
It is in one of the smaller mining areas, the sill pillar was about seven and a half meters thick, and it was a pillar between the 2901 level and the level below or the 2900 level. Christine spoke briefly about the significant rescue effort that is underway and continues to be underway as we speak. In the meantime, we have constituted a cross-functional team of discipline experts and have commenced a thorough investigation into the incident. At this stage, we're gathering data and all the circumstances surrounding the incident in order to really kickstart this investigation. When the incident occurred, we voluntarily suspended all underground mining operations. However, the infrastructure construction associated with Phase 2 of the project is continuing.
Underground development activities will recommence once we've cleared that everything is safe and ready to commence. Given the nature of this incident, we will pause, and we will review. We'll undertake an in-depth area-by-area assessment of the production areas, and that assessment will go into the mine design and the mine schedule and the ground management plans before we progressively release mining areas back into production and continue with the ramp-up of Obuasi. Thank you, and I'll hand back to Christine.
Thanks, Graham. At this point, I'd like to reiterate that the safety and well-being of our employees is our top priority. As Graham mentioned, as the investigation progresses and the assessment of working places advances, we certainly would expect to provide additional detail on the estimated impact on this year's production and the ramp-up of the project to the market in due course. With that, we'll open up the call for questions. Apart from Graham, who's on the call, we also have members of our executive team and our Head of Global Safety, George Coetzee, who's actually also on the call as well. Thank you.
Thanks, Christine. Irene, we're ready to take questions.
Thank you, sir. Our first question is from Shilan Modi of UBS.
Good afternoon, everyone. Sorry to be engaging at such a tragic time. Unfortunately, a few questions from my side. Will you be conducting a review of the safety mechanisms at the mine, and what sort of review does that entail? Is there a risk that some of the mining areas get sterilized through this process? Based on the diagram, it looks like probably a third of the mine can be impacted, but give us some idea of what sort of area is potentially impacted by the reviews you're going to be doing in the next while. I'm assuming that this could take a few months. Hopefully, you can give us some indicator of what sort of period of time we're looking at, even if it's a rough indicator.
Maybe can you also tell us about the government and community response to your approach to what's been done? I think you've taken quite a proactive approach, and maybe if we can just get some color on other stakeholders' impressions. Thanks.
Graham?
Thank you, Shilan. I didn't expect that I'd be talking to everybody so soon after our results. Clearly, we need to make sure you're fully briefed on what has happened at Obuasi and understand how we're handling the situation. In regard to your first question regarding conducting a review of safety. Clearly, safety, as Christine iterates regularly, is our first value. This incident is a significant incident and that is a real disappointment to us, and not only to the impacted colleague but also the progress of the Obuasi redevelopment project, which, as I've reported, has been going rather well. Yes, we will pause to undertake a full review. In the feasibility study, we did rework the entire resource model. We did rework the entire mine design.
We did take account of the history of mining at Obuasi, and we designed the mine plan, mining methods, mining schedule, and the ground management plans in recognition of the reality of Obuasi. To that effect, we included new technologies, not new to industry, but certainly a bit more advanced than Obuasi used to do in terms of the mine operation. In terms of development, jumbo development with full shotcrete support in all the major drives, including the operating development, the use of cable bolting machines, updating and upgrading the level of ground support. We also incorporated the construction of a paste fill plant, which will be used for cemented backfill instead of prior practice of using rock and hydraulic fill. As the mine was being brought in the operational readiness phase, we deliberately went through the Mine Operating System.
We leveraged off good systems out of our Sunrise Dam operation and worked through all the processes that we needed from the geological model right through the long-term, short-term, medium-term mine design, and right down to how we design excavations. All the various disciplines that go into that design and how that work is then communicated for execution to our mining contractor. That was quite deliberate work over a good 18 months period as part of the operational readiness. Now, the purpose of that was to make sure, and to build in safety systems. This incident is in a small area, it's a hanging wall of Block 8, but it is a structural failure of a horizontal sill pillar.
The nature of that causes us to think that we should understand the circumstances of this incident and the causal effects, and then review the approach that we have for the mining areas. Our plan is to do that on an area-by-area basis. The detail of that and the team that will undertake that is something that we're working on currently. That approach we're formulating. I assure you it'll be thorough, and the reason it needs to be thorough is that we're building a mine here for the long term, and we want to be successful for the long term. Out of this incident, there may be things that we do need to improve. We may need to review our mining sequence. We may need to revise our ground support. We may need to change the way we gather information that goes into the whole design.
We'll do that. In terms of timing for the investigation, difficult to say. It could be as short as two weeks, could be two months. It depends on what we find as we get into the investigation. In parallel with that, we'll also do the in-depth review, covering the mine design, mine schedule, and the ground management plan. We will do that area by area. As we do that, we'll release those areas to production. I think your general sense that it will take us some time to do that is correct. I don't want to speculate on how long at this point. We're not going to rush. We're going to do it carefully. In terms of your question about sterilizing, I don't think so.
I think it will be more a matter of adapting our mining process and the way we go about managing the mining process as opposed to, at this stage, making some call that some areas are going to be sterilized. I'd emphasize again that this incident was in a small area in a hanging wall structure to the main ore body. It certainly is prudent to go back and review what we've designed and the systems that we've put in place. In terms of the government, when the incident occurred, the Inspector of Mines visited site. He instructed us to suspend work in the area that was impacted, but he didn't suspend work throughout the mine. That was a decision taken by AngloGold. We subsequently had visits from the Principal Inspector of Mines and the Chief Inspector of Mines in the course of the last week.
They have visited the site, and they've given no further instructions, but they certainly noted that we've been proactive and have suspended mining activity. We have notified our responsible minister, the Minister for Lands and Natural Resources, and appraised him of the situation. From a government point of view, we're getting support. We've had support from the inspectorate. We've had support from the local community. In terms of the local community, we have communicated to them. We've provided direct care to our colleague's family. Obuasi, it's a sizable community, but it's a tight community. Our people are working and supporting the family. The other thing that we need to be cognizant of is that Obuasi is very important to the community of Obuasi. We've been employing up to 4,500 people, and many people rely on Obuasi.
Our approach, nevertheless, is to be safe about our operation, but to progressively resume the operation. We haven't made any decision to suspend anybody's work or to stand anybody down. In fact, what we will do is use the time at hand to train, to do maintenance, to review, to check all our safety systems and deploy people as much as we can into productive and useful work. Thanks, Shilan.
Thanks very much for that. Good luck in this difficult time. I will pass to the next person for questions.
Thank you, Shilan. Irene?
Our next question is from Adrian Hammond of SBG Securities.
Afternoon, everyone. This is a question just as a follow-up on the last. For Graham, just listening to what you're saying, Graham, is it fair to say that your review of the mine plan and the scheduling fits the steady state outlook for Obuasi under review as well?
I don't think so, Adrian. I think it is a matter of the ramp-up. Certainly, this is going to impact our ramp-up schedule. Just the fact that we pause and review is going to put some time into that ramp-up schedule. I have no reason to think why a resumption is going to put some sort of cap or reduction into what the mine production outlook is. We've communicated 350,000-450,000 ounces a year, lower in the first 10, higher in the next 10 years. The nature of this incident, I don't think would give me cause to think that is at risk, but it may well change the way we do things. The level of ground support, the approach to the sequencing, and so on. I don't think in terms of the scale of Obuasi should be in question, but it's more the how.
Thanks, Graham. I have a second question for the team, and I think just going back and looking at your safety, which had improved quite dramatically since the exit out of the South African business, but has since deteriorated again and surprisingly happening in mechanized operations at your overseas businesses, which shouldn't be happening. Is this, do you think, all just being freak accidents, or do you suspect that safety discipline is lacking?
George, do you want to comment on that? I think what I'd like to say is that two incidents that have happened this year, we did have a fall of ground incident at Serra Grande mine in the first quarter of this year. This is the second fall of ground incident this year, our focus was to focus on some of these critical control failures, so low frequency, high impact incidents. That was specifically a big focus of our revitalized safety review. George is here with me as well. He can give you more insight into that. I think clearly what I'd like to say categorically is this will be the strong focus on safety. Of course, the areas that we're going to need to reinforce our discipline and like Graham says, the way we do things.
I certainly don't think that this is an indication of a stepping off from a discipline perspective on safety. Thanks. George?
Thank you, Christine, and thank you for that question. Yeah. We acknowledge that we have had a setback in recent times since the exit of South Africa. Certainly, we don't see these as freak accidents. We've always had a very robust safety strategy, and prior to these incidents, we were busy with a process, as we do on a continuous basis. We review our safety strategy on a two- to three-year interval period. We were looking at a revitalized safety strategy, realizing that our risk portfolio is changing with the exit out of South Africa. We have conducted a very detailed review of our strategy, revitalized it, as Christine said, and we're busy rolling that out. A very important piece of the strategy is to distinguish between what we call these high consequence events, which these events are normally rare. They're not that frequent.
The mechanisms of failure to them are very different to these low consequence events. We are focusing really hard on a two-pronged approach to address these high consequence events, and that's where the strategy is focused at. In parallel with that, maintaining the organizational safety culture to the desired level is critical for us, and we're also doing work in parallel to address that. I don't think mechanization is something that we are introducing. Obuasi mine, in the longer term, will be a totally different operation than what it was historically, and we are busy and factoring that into the plan when the appropriate technologies will come in, which will reduce the risk of human error or administrative failure. We're convinced that with our controls at a high level, we will be able to address this. Our strategy is very comprehensive.
We will learn from this investigation. As Graham has indicated, it's too early to say what went wrong. Once we have concluded the investigation, we will have a more detailed review and adjust as appropriate. Thank you.
Thanks. Wishing you all the best to getting back on track.
Thank you very much.
Thanks, Adrian. Irene, next.
Our next question is from Arnold Van Graan of Nedb ank.
Yes. Thanks for taking my question. Question for Graham. Two questions. The first one, Graham, were there any similar incidents like this in the previous mine? In other words, was this something that was identified and carried over from a risk perspective? Then my second question, Graham, you talk about a multidisciplinary team that will be conducting this review and investigation. The question is, would COVID-related travel restrictions result in a much longer timeframe for doing this review and coming to the conclusion than what it would be without that? Because normally in a review like this, you scramble teams across the globe, consultants across the globe, and bring them in. Obviously, with COVID now, that could add to that timeline. Thanks.
No, thanks, Arnold. In regard to a similar incident in the previous mine, I'm not aware of one. I followed the feasibility study, been involved with Obuasi through that whole period from 2014, and I'd have to say that in the course of the study, we're aware of failures, and we're aware of the ground conditions, but an incident in Obuasi's history, specifically like this, I am not aware of one. I will investigate, and if that is the case, I'll let you know, Arnold. Certainly, were issues around ground support and falls of ground at Obuasi. Hence, in the design of the redevelopment, we've certainly lifted the standards substantially and back up to what we would normally expect for a mechanized mine in terms of the ground support and the technologies and systems associated with it. We've certainly done that.
In terms of a specific incident, I can't say. Your question about pulling together a multidisciplinary group. That group will include the geology people, our geotechnical team, our mining team. We'll bring in expertise, particularly around the geotechnical area, given that this is a sill pillar failure. We're gathering all of the information on-site. George and the lead investigator is already directing the work from S.A.. Within Africa, the travel is achievable, and so one can move around Africa. The entry into Ghana requires a prior COVID test and then a test on arrival. In fact, I've just returned from Obuasi. I'm here in Australia in quarantine for 14 days. Travel into Ghana is quite feasible, and then travel to the mine, there's no obstacles to that.
We have COVID protocols in site for anybody getting to site, where we test them again before allowing people on the site. We've got all that in control, and that logistics does provide some delay, but clearly, that's what one has to do in COVID times. It does slow things down a little bit, but not to the point that I think it's going to hamper the investigation. The other aspect of the work we've got to do is a review area by area and working on how that will be done and how we will gain some support in doing that. We'll talk to competent and experienced mining consultants to assist us with that work. We'll do some of that work with our site's technical team and also with AngloGold's technical team, who are based in various parts of the world.
There'll be travel logistics associated with that, but we'll do our best to work around that so it doesn't detract from the pace at which we can do the work. It'll have some impact, but I can't say how much.
Thank you, Graham. All the best. That's it for me.
Thanks.
Thanks, Arnold. Irene.
Thank you. Our next question is from Leroy Mnguni of HSBC.
Good afternoon, guys. Graham, I've got two questions, please. The one is just to understand how uniform the pillar design and specifications are across the whole mine. If you find that Block 8 is a structural issue, what are the chances that the same issue would apply to some of the other blocks? Then maybe just for my understanding, what is the split in production from the three shafts that we see on the diagram in terms of contribution to overall steady-state volumes?
Thank you. In terms of how uniform are the pillar designs, each mining area will have its own characteristics based on the geology and based on the rock mechanics in that specific area. The Obuasi mineralization fits within the Obuasi Shear, the Shear is a wide area of shearing. It is not just a single fault. That Shear bends and twists along strike and down dip. It is really that Shear that controls all of the mineralization. The other factor will be the deepening of the mine and the natural ground pressures that increase as one moves deeper. This incident happened at about 900 m below surface. The mine will progress down to, in our current plan, about 1,500 m below surface.
The pillars, be they sill or be they vertical pillars, and will design specifically to the orebody geometry and the ground conditions by area. I wouldn't say that everything is uniform. It's got to be uniquely designed. An area like Block 8, we will mine our primary stopes, and then we'll backfill those with cemented backfill, and then we'll take out the secondary stopes, and then we'll design the access development into that area. A similar sort of approach using long hole stoping right through the mine. In this area that the incident occurred in, we were basically doing longitudinal retreat mining because it's quite narrow, and it's not transverse stoping like you'd use in some of the bigger areas. The ground support regime is really specific to the area you're mining and the geometry of the orebody at the time.
It was on that basis that we designed what we call the MOS, or the Mine Operating Systems, and the means by which you design the work and that you sign off the work and issue work instructions for the execution of the excavations. Not unique across the board. In terms of your question about the shafts, the mine operation for the first really four or five years is to the left of that diagram and is around the KRS shaft. Movement out of the mine will be through the KRS shaft, which is a capacity of about 3,500 tons per day. It would be decline haulage of another 3,000 tons per day. That's about 6,500, but 4,000 of ore and 2,500 of waste.
As the mine deepens and the center of operation moves to the north around the KMS shaft, that's when we bring the KMS shaft into production. The first time we would use that will be somewhere around 2023. In the current plan, we don't move any further north, so the KMS and the KRS shaft would be the hoisting systems as well as the decline. It's only way in the future that we get into the Cote d'Or area, which is right in the north. That would be an area where we're mining into the quartz veins, initially in the shallow areas, but that will be by decline access.
In the longer term of the future of the mine, as you see the general plunge of the ore body, it moves below the 50 level down to 60 and 70, and then you're starting to move to the northern part of the mine. But that's not part of the redevelopment scope. That's really the opportunity in the future. I hope that answers your question.
Yes, it does. It's very clear. Thank you. Good luck, guys.
Thank you.
Our next question is from Nina Dergunova of Goldman Sachs.
Good day. Thank you very much for arranging the call around this event. My question is quite broad. Do you think about ramping up production at any other assets in order to reach the full-year guidance, even if Obuasi production is lower for this year? Thank you.
Thanks, Nina. I just want to make sure that I've heard you clearly. You said are we changing production on any other assets. Was that your question?
Yes. Continuing as well. The question is, if you can ramp up or add more production than initially expected at any other asset that you have in your portfolio in order to reach a full-year output, those outputs in line with the beginning of the year expectations. Just talking about Obuasi annual production.
Yes, thanks for the question. Nina, what we've actually put out is we've increased Obuasi's estimated contribution that was included in the 2021 guidance. What was included in the 2021 guidance was 300,000-350,000 ounces. I think what we're actually saying is by increasing that, we really are keeping the production guidance relating to the remainder of the operations intact. Clearly our view is not to switch the other assets to make up for this. Certainly what we will do is as the investigation progresses, and we can provide more detail on the estimated impact on this year's production and ramp up relating to Obuasi, then we'll certainly keep you informed.
Thank you. Thank you very much. Good luck with the ongoing efforts. Thank you.
Thank you.
Our next question is from Scott MacDonald of Scotiab ank.
Everyone, thank you for the updates. A few questions for Graham. Just a couple of quick ones to start. Are there any stockpiles at surface at Obuasi that you could generate some production from while mining is suspended?
They're very limited, Scott. We're in ramp up phase. We were building and the mill was commissioning it, as I've explained, early in the year. Stockpiles are very limited. You've learned probably this week that we won't have ore supply to keep the mill moving. It's a pretty abrupt stop. There's a small opportunity in the process of the redevelopment. We had to clean out some ponds, and we did that, and there's maybe 5,000-10,000 ounces or so, which requires a direct CIL treatment. It's not something that the plant is permanently set up to do, but we do have a CIL circuit, so we're going to have a look at that and see if we can treat that direct leachable material.
Which probably leads into, if you don't mind, I'll segue into another comment, is that we have a BIOX plant, and when we were building up in Phase 1, we were growing that bacteria and building it up to commercial scale over a period of time. We're putting in place plans to basically keep all of that bacteria culture alive. It's a living organism. It needs to be fed. We do have concentrates . That way, we can do that and keep the bacteria in a healthy condition so that when the plant resumes, we're able to bring that back up as we have done previously.
Okay, got it. Thank you. What mining rate were you averaging in the underground, say, in the month of May prior to the incident?
We were starting to push towards 3,000 tons a day. The other factors that we needed to sort of lift that were some of the infrastructure things that I talked about, primarily getting the major vent fan underway and the commissioning of that fan is in progress right now. Two big fans on top of that new vent shaft. That was going to give the ventilation to the deeper parts of Block 8 and allow us to better get productivity and machinery and logistics into that area. We were commissioning the ore pass systems and the grizzly systems, rock breaker systems feeding onto the main shaft. That was all tracking along. We were tracking to 3,000 and then needed to push ourselves up to four.
We indicated at results that that was going to take us the rest of this quarter and then into quarter three. Clearly, this now pushes that timetable out.
Would you say it's sort of like a one-for-one impact on the delay to the ramp-up schedule? Like for every day that underground operations are suspended, that there will be one day of delay to that schedule? Or is there some ability to catch up, do you think, once you resume operations?
A little difficult for me to forecast, Scott. Probably the way to answer the question is to say that we'll do an area-by-area review, and we'll bring areas in stepwise. As we have done the review, we'll commence production, and then we'll move on to the next area. It means that one doesn't immediately jump to where we were in May. It means that it'll be a bit flatter again. We'll, for example, bring on Block 8 South, and then we'll move to Block 8 North, and then we'll move to Sansu. I think that's the better way to do it, and rather than jumping immediately back to the same level that we're at. To be realistic, it is going to be a flatter ramp up. There'll be a period of time to get back to where we were in May and then to continue on the ramp up.
Right. Okay. Any preliminary thoughts on the extent to which maybe this incident might impact the mining method you apply in certain areas and maybe the amount of backfill required?
Bit early to tell, Scott. Certainly, there'll be lessons to learn from the incident. Not only from the lessons learned from the incident, but it's worthwhile just reviewing our approach. As I explained before, we've a method that's methodical and well-structured in terms of the way we execute work. With the results of the investigation, it does cause reason to go and have a look again and make sure we've got that right. There may be changes. We may change sequences, we may change ground support regimes. We had already included paste fill as being the means of fill for all secondary stopes, as opposed to hydrofill and rockfill. That won't change. There may be some adaptation to the sequencing and the mine schedule.
It's difficult to say at this point, other than to say, when one learns from incidents, then those learnings need to be understood and built back into your operating systems and designs. I'll update you on that as we predict, Scott.
Okay. Thanks for that. One last one, if I may. Just, is there any possibility that historic illegal mining activity that perhaps you're not fully aware of could have had any impact on the geotechnical conditions here, or perhaps even in other areas of the mine?
From a historical illegal mining activity down in the mine, I saw all of this firsthand in 2013, then saw what was done up in the north in 2016, clearly, that was well away from the area that we're working now. I think it's improbable. The nature of the illegal mining, the scale of it, is much, much smaller. I doubt that it will have had an impact. We'll investigate.
Okay. Thanks for that, Graham. Much appreciated. Best of luck with the recovery efforts and the investigation.
Thank you.
Thanks, Scott. Irene?
Thank you, sir. We have no further questions on the line. Would you like to make any closing comments?
Yes. Thanks, Irene. I'm going to just hand over to Christine for a couple of comments and just to thank everyone for joining us.
Thanks, everyone, for joining us on the call today. The focus right now is on the rescue mission, and our thoughts and prayers do remain with our colleague's family during this very difficult time. We're very comfortable that the long-term value proposition of Obuasi remains intact. It's a 20-year- plus life of mine, 30 million ounces mineral resource. You've heard from Graham today that he's progressing the investigation in a very methodical way. Certainly, as we obtain additional information and are able to estimate the impact on this year's production and ramp up of the project to the market, we'll make the necessary disclosure. I think just one other comment before I close off, to provide a bit more context, is that we have always said that our production is weighted to the second half of the year.
I think certainly bear that in mind for the other assets as well. In particular, this is a transition year for us. We are in the middle of a reinvestment program. Clearly we are expecting this to benefit the assets across the portfolio, but in particular, the key assets where we are progressing our reinvestment program. With that, I'd like to thank you for joining us today, and I wish you all the best for the rest of the time. Thank you.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.