Good afternoon, ladies and gentlemen, and welcome to the AngloGold Ashanti Q3 2020 Market Update Conference Call. All participants are currently in listen only mode. There will be an opportunity to ask questions later during the conference. Please note that this call is being recorded. I would now like to turn the conference over to Stuart Bailey.
Please go ahead, sir.
Thank you, Dine, and thanks everybody for joining us for our Q3 market update. Before we start, I would ask you please to look at the Safe Harbor statement, which is at the front of the presentation. It contains important information, particularly regarding forward looking statements, and I'd urge you to reference it carefully. We have a full plate for you today. Christine will be talking through a high level view of our performance and strategy.
Ian Kramer, our interim CFO, will be talking through the financial performance. Caelo Ntuli, our Chief Operating Officer for the Africa region, will be talking through those operations. Lythmic Edwards doing the same for the international operations before Graeme gives us a detailed walk through the Owaisty project performance and Christine will wrap up. With further ado, I'm going
to hand over to Christine.
Thanks, Stuart, and good day, everyone. Let me start by reiterating AngloGold Ashanti's strategic objectives. This remains to safely and responsibly deliver better quality production aimed at widening margin, extending mine life and improving the overall quality of our portfolio, while focusing on disciplined capital allocation. Back in 2014, we committed ourselves to a long term goal of creating a self sustaining company, which would offer real exposure to goals and improving returns over time, while not asking shareholders to recapitalize the business every few years. I'm pleased to say that not only have we consistently delivered on that objective, but remain essential to the WayVidi business.
COVID-nineteen does not change that. We've been fortunate enough to navigate this pandemic through a combination of proactive initiatives, quick adaptation we need to study and of course, we support of Goldstrike. We set none of them for granted. We are mindful that there are many who are struggling and we continue to lend support to our host communities and others to ensure we all come out of this as possible. We're committed to maintaining our discipline, a trait which has stood us in good faith through much leaner time standards.
We've also continued to strengthen our balance sheet, capturing wider margins, growing ore reserves and ramping up our royalty to coal production. And the strength that runs through all of this work is our effort to maintain and strengthen our markets to operate through effective ESE practices. On the safety front, we tragically recorded 1 facility during the Q3, which we spoke at our H1 results. That took place at Guasi in July, where a security guard passed away after being struck by a private vehicle at the entrance to an employee housing estate. This is another hard reminder of the essential work and the tension required to achieve 0 harm at all of our workplaces.
We have a firm foundation on which to build those improvements with an all increase in fee rate which improved by 31% year on year to 2.23 injuries per 1,000,000 hours worth, an all time low for ancillary cold Ashanti. We continue to proactively manage the COVID-nineteen impact across our operations. Moving on to slide 6. As we discussed with our Q2 results in August, production and capital remained equally back in weighted. This is especially true for CapEx this year.
Production this year has been resilient, particularly in light of potential disruption from COVID-nineteen. For the 1st 9 months, we produced 2,300,000 ounces, taking us 75% of the way to the midpoint of full year guidance. Over Q3, production of 837,000 ounces was 11% higher quarter on quarter, underpinned by strong performances at most times. Sunrise Dam and AGA Villa Resolve with this game down. Abu Dhabi was the largest start continuing its ramp up with a 52% quarter on quarter increase in production.
COVID-nineteen costs only around 18,000 ounces of production with most of it again coming from South Africa. The cost performance was strong. All in sustaining costs rose 1% year on year to $1.44 per ounce Once you strip out the $51 an ounce impact related to COVID-nineteen, the underlying number would have come in below $1,000 an ounce. We generated strong improvements in cash flow on every metric. Free cash flow was most profitable year on year to $339,000,000 That's all the more impressive when you consider it doesn't count for a considerable chunk of cash which remains in the DRC awaiting repatriation.
Ian will talk to that in a little more detail in a moment. We did almost halved year on year to $875,000,000 that's the lowest in almost a decade. This was due mainly to strong cash generation and was helped to lower by the $200,000,000 initial proceeds from the sale of our producing assets in South Africa. With the falling debt and rapidly increasing cash flow, you can really see our leverage improve. Net debt to EBITDA came in at 0.36 times, which is the lowest level since 2011.
Our all in sustaining cost margin has grown to a healthy 45% during the quarter, helped by our focus on cost control and of course the strong gold price. The average spot price for Q3 was $1900,000,000 an ounce. Looking at the 1st 9 months of the year, that margin has widened to 45%, up from 25% in the same period last year. This 3 percentage point increase in margin over that period has translated into an almost tenfold increase in free cash flow generation, again demonstrating our strong leverage to the gold price. Moving on to capital allocation, we have a clearly defined capital allocation framework, which requires that we improve returns to shareholders, while balancing our completing capital priorities to invest in upgrading our new program and improving the balance sheet free cash flow generated before growth capital.
As the slide shows, this shift nicely rebalances our capital allocation and improves the direct reward to shareholders. Based on the last 12 months of performance, this formula implies a competitive dividend yield of around 1.9% at our current sheet price. We remain focused on improving the quality of our production over the long term. We've traded out a relatively higher cost, shorter life in South Africa and Unimaille, while simultaneously ramping up lower costs and very long life production at Abu Dhabi. While we've decided by marching Abuasi's safety towards commercial production, we're making excellent leeway in increasing development and brownfield restoration, both aimed at improving operating flexibility and increasing reserves.
Balance sheet strength remains the central point in our approach, supporting feasibility studies at Gramadacci JV and Quintadona and brings us closer to realizing value from 2 top tier projects in Colombia. With that, I'll hand over to Ian Krausz to cover the financial performance over the quarter.
Thanks, Christine, and good day, everybody. The asset delivered a solid operational and financial performance for the Q1 of the year. We saw the last quarter in retail that African operating assets contributed assets contributed to the group's performance before the sale thereof to Harmony Gold. The sale was concluded at the end of the quarter, the The Orbati redevelopment project continued its ramp up delivering a 52% quarter on quarter increase in preproduction ounces. These performances assisted to support the impact of reduced performances at Tropicana and Peruvian Wadia.
Our all in sustaining cost rose by only 1 percent or $13 per ounce to $10.44 per ounce in the Q3 of 2020 compared to the Q1 of 2019. This mainly reflected higher cash costs. Adjusted earnings before interest, tax, depreciation and amortization or adjusted EBITDA increased by 72% to $813,000,000 from $468,000,000 in the Q1 of 2019. Cash flow was robust, demonstrating significant support from the rising gold price. Free cash flow generated was $339,000,000 in the 3rd quarter of 2020.
This was a near 4 fold increase from the $86,000,000 generated in the comparable quarter of last year. As a result of the 50% higher gold prices, lower costs from continuing operations, lower capital expenditure, which was partially offset by higher tax paid. This is the highest free cash flow generation for the group since the Q1 of 2011. Free cash flow before growth of capital, the metric on which dividends are calculated, increased by 104% to 3 $61,000,000 during the quarter compared to $177,000,000 in the Q1 of 2019. It should be noted that the $200,000,000 proceeds received on the SA asset sales are excluded from free cash flow.
As mentioned by Christine, free cash flow does not include the cash flows from Kibali, which remains in joint venture bank accounts in the DRC. Cash received from Q1 totaled $38,000,000 making total cash received for the year to date to $92,000,000 The company's attributable share of the outstanding cash balance that has not yet been repatriated from the BOC grew by $66,000,000 in the Q3 to $339,000,000 Barry, the operator of the Tivoli joint venture continues to engage with the POC government regarding remittance of cash balance. Cash flows were further impacted by various dealables that continued to be locked up at Geita and at Kibali as well as by an increase in lockup of the recoverable export due to Cerro and Wagya. The 2020 Finance Act becoming effective on 1 July 2020 in Tanzania, remaining the 20 14 Value Added Tax Act with retrospective effect, thereby allowing for recovery of that refund for mineral exporters from July 2020 onwards. The administrative bank verification process has not yet resumed a data.
However, this is due by a this timing issue. In Argentina, this inflation was adopted to decrease export duty rates from 12 percent to 8% effective from the end of September 2020. The total capital expenditure decreased by 31% year on year to $161,000,000 in the Q1 of 2020 compared to $234,000,000 in the Q3 of 2019. This decrease was largely due to the lower project spend at the OBLP due to the impact of the pandemic on delivering of supply and restriction on contractor movement as well as capitalized preproduction revenue, offsetting a portion of the growth capital spend during the quarter. As a result, growth capital expenditures declined to $22,000,000 in the quarter compared to $90,000,000
in the Q3 of 2019.
Total sustaining capital expenditure marginally declined by frequency to $139,000,000 in the Q3 compared to last year. Our strategy of improving operating flexibility through investment in all reserve development and reverse conversion at site with high geological potential over the next 2 to 3 years remains firmly on track. Moving to Slide 12, our total cash cost for the quarter increased marginally by 2% to $8.01 per ounce compared to $7.86 per ounce last year. Favorable exchange rate movements and improved grade were partly offset by inflationary pressures, reduced throughput volumes and higher royalty payments. Average recovered grades improved by 4% when compared to last year, with the most significant improvements coming from Sunrise Dam, Ideaprene, Data and Fury.
Throughput volumes decreased on average by 6% with the biggest impact of the South African region and ILIA 3. Excluding South Africa, fruitless volumes decreased by less than 2%. As mentioned before, the 1% increase in all in sustaining costs for this quarter compared to last year the result of higher cash costs. COVID-nineteen related impacts resulted in the all in sustaining costs being approximately $31 per ounce higher for Q3 2020 due to $22,000,000 COVID-nineteen related costs incurred and approximately 18,000 ounces lost production in the South African operation. Turning to the balance sheet.
We remain committed to maintaining a flexible balance sheet with an adjusted net debt to adjusted EBITDA target ratio of 1 times through the cycle. Adjusted net debt decreased to $875,000,000 at the end of September 2020, a 39% decline from the end of the previous quarter and a 47% reduction compared to the same quarter last year. This is the lowest level of net debt since 2011 and 72% of its peak 14 at the time when the company was self funding its share of the development cost of Kibali and Tropicana.
The ratio of adjusted net debt
to adjusted EBITDA of CET100000020 20 was 0.36x compared with 1.06x a year ago. Again, this is the lowest point for this ratio since 2011, reflecting disciplined reduction in debt and robust cash generation from the business. We managed to achieve the significant long term balance sheet improvement through our disciplined capital allocation strategy without issuing equity during this whole period. The balance sheet remains robust with strong liquidity comprising the US1.4 billion dollars dollars RCF, of which approximately $700,000,000,000 was undrawn. The undrawn R4 $1,000,000,000 of African RCF and cash and cash equivalents of approximately $1,000,000,000 at September 2020, excluding any cash balances at Kibali and Aviona.
Our new 10 year
$700,000,000 voice offering at the end of the quarter was more than 6.5x oversubscribed and priced at 3.75% per annum, the lowest achieved by the company for a bond offering. The net proceeds were directed to repay a portion of the outstanding borrowings under the $1,400,000,000 multicurrency last year at the beginning of the Q4. The new bond will reduce annual finance costs by $11,000,000 received from the sale of the South African producing assets were utilized by the received from the sale of the South African producing assets were utilized to further reduce net debt. On 19 October 2020, we voluntarily canceled our ZAR2.5 billion RCS in South Africa, leaving us with ZAR1.5 billion of facilities undrawn in South Africa. The undrawn $1,000,000,000 syndicated bridge loan facility originally entered into in April 2020 to provide additional financial flexibility to meet the uncertainty of COVID-nineteen pandemic was fully canceled in early October.
Our credit ratings are unchanged. We have investment grade ratings from Moody's and Fitch and a sub investment grade rating from rate rating from S and P. Turning to my last slide on the reinstated guidance. We expect a strong finish to the year, especially at Geyser as well as the operations in the same Australia and Brazil. As we previously flagged during the year, COVID-nineteen has resulted in some capital expenditure referrals across the portfolio.
The most notable thereof is at RBRC, where we expect $70,000,000 to $90,000,000 of Phase 2 project capital being rolled over into 2021. We expect a significant step up in sustaining capital expenditure in the Q4 of 2020 as we invest in waste stripping at Iridium Tropicana and commence the planned development portion of the 3rd underground mining area at the Geita Yule ore body. These investments will be made in parallel with the ongoing investments in orders of development and exploration. For the year end reserve exploration, our all reserve pricing will increase by $100 down to $1200 down, reflecting the impact of increased gold prices. On 21 September 2020, the company reinstated its annual guidance given improved operating certainty amidst the COVID-nineteen pandemic
and in
anticipation of the conclusion of the state of the South African assets, which occurred at the end of September. The group is expected to produce between 3,030,000 ounces and 3,100,000 ounces, including 9 months of production from the South African producing assets. All in sustaining cost is expected to be between $10.60 per ounce and $11.20 per ounce, again, including contributions from the South African assets up to the end of September. Sailing capital expenditure is forecast between $610,000,000 $630,000,000 and non sustaining or growth capital expenditure between $280,000,000 $300,000,000 resulting in total capital expenditure of between $890,000,000 $930,000,000 We remain mindful that the COVID-nineteen pandemic, its impact on communities and economy, any actions authorities may take in response to it are largely everyone. I'm now on slide number 16.
To everyone. I'm now on Slide number 16. Let's take a high level look at the Africa operation, starting this time with South Africa. The region produced 96,000 ounces during the quarter at an all in sustaining cost of $13.22 an ounce, with production 15% down compared to the previous year, largely affected by the mobilization of personnel after the COVID-nineteen lockdown and cost impact as a result of the lower production. Despite the impact, the region generated 50,000,000 dollars in free cash flow during the quarter.
The sale of the South Africa region was successfully completed on the of The region produced 411,000 ounces at a modest sustaining cost of $903 an ounce compared to 387,000 ounces at an all in sustaining cost of $900 an ounce in Q3 of 2019. The region continues to perform exceptionally well, assisted by operational excellence drive and efficient improvement as is evident in the quarterly results. Region generated free cash flow of $218,000,000 during the period compared to €94,000,000 during the same period of last year. We have delivered solid production, cost and cash flow performance for the 3rd 9 months of the year with the year outlook indicating continued performance in quarter 4. We continue to see encouraging results from Siguiri with substantial improvement in recovery, while the Bobo Waz redevelopment projects continues to ramp up, delivering a 52% increase quarter on quarter in production and Phase 1 commissioning completed at the end of September.
At Geita, the production performance was aligned to the same period in 2019. During Q3, Gator achieved an all in sustaining cost of $832 an ounce, 6% lower than the same period in 2019. Post the approval of the mining payment for Greater Hill, mobilization has commenced and ground support for the new portal is underway. Kibayo recorded another solid performance during the quarter, maintaining attributable production at 91,000 ounces, coming in at an all in sustaining cost of $7.65 an ounce. Igloprene had another strong quarter with on target production with cost impacted by higher royalties and exploration costs as we drill to find further incremental opportunities that compares to the same quarter in 2019.
It is important to note that Indua Cream is entering an investment stage over the next 3 years in Cat Bex and CSF. Accelerated waste stripping in Block 7 and 8 Cat 2 continues using a split shell design, which will result in accessing over 2,000,000 tonnes of ore at the grade of 1.75 grams per tonne by the middle of 2021. All of these initiatives are expected to extend the life of mine to 20.81. The Block 1 drilling has returned very positive results with an updated model also expected in the Q4. Now looking at Sigmulik in more detail on Slide 17.
We continue to progress the turnaround initiative despite some material supply challenges arising from COVID-nineteen. We saw a 7% improvement in recovery quarter on quarter as a result of recovery improvement initiatives. And currently, the September recovery on average exceeded 82% with peaks of up to 86% realized. This was largely as a result of completing improvements in milling and classification package. The Kraken plant has performed well through the rainy season and continues to meet the fifty-fifty planned design target.
Confirming that the wet season modification and stockpile strategy has mitigated the challenges experienced in 2019. We reported in the first half about the presence of carbonaceous material with the associated effects on mechanical recovery. We have completed the design and manufacture of CIL conversion for 3 additional tanks to improve the plant's resilience to crack robbing. Converging of the terms are currently in progress and commissioning is planned for the end of this year. We are also happy to report that
we have received the mining and
the road construction permit from the government to access the Block II minuteing area. We are planning to declare a new reserve in Block II by the end of this year. We are also working to finalize the social partnership with the host community as part of our company building. Block 2 will displace the marginal or plant feed material with higher grade oxide feed. Now turning to CATA on slide 18.
We continue our strong exploration forecast to increase ore reserves. We have significantly increased underground resources and reserves from 2015 since entering underground mining for the first time. This strong focus is continuing into the silica, supported by significant progress of reserve compression trading. As reported, all key regulatory approvals have been obtained for Gator Hill underground. The opening up of Gator Hill underground mineral resource and ore reserves has commenced with potash establishing it.
The sequence of mining is stuck in Block 1 and Block 2 and proceed along stride towards the eastern side of Block 5 and Block 6. Geita Hill opens up a new 3rd underground high grade mining source for Giza Mine. As can be seen from the picture, there is potential for a large reserve along strike and we will begin to declare new reserve starting in 2021. Now looking at OpenPeats potential at Geita on Slide 18. As discussed briefly in the last quarter, we will be declaring a significant reserve in Yamalalimu District by the end of this year.
This area replaces Maintanga open pit as it was repeated in the current quarter. And we ensure that we continue to fill the mill at 5,000,000 tonnes per annum with fresh ore over the long term. Subject to government approvals, we expect to be mining in Yamalalalumu in the second half of twenty 21. This area gives Geyser the opportunity to again add open pit reserve. I look forward to updating you at our next quarterly results with reserve additions, which we are expecting to exceed current efficiency.
In conclusion, our focus as we go into the final quarter of the year is to maintain the strong performance of all of our assets. At Seguri, the team continues to work on improving the recovery rate as it continues to move in the right direction. Our exploration projects continue to yield positive results and we will update the market with our Q4 results on the reserve growth results, primarily in GECAT and ECG. Thank you. And now I hand over to Jose.
Thank you, Pedro, and good day, everyone. The international operations completed a solid Q3 with noticeable improvement across all key operating and financial metrics. I'm particularly pleased to report that our safety metrics are continuing to improve with our all in frequency rates reducing by over 30% year on year. Starting with Americas, the reason Blue is 181,000 ounces of salt in the quarter, slightly above the 179,000 delivered in the same quarter last year with the corresponding all in sustaining cost, which was markedly lower at 9 $63 per ounce. This is $155 per ounce lower than the corresponding period last year.
This reflects the strong operating performance from the Brazil assets, which delivered 32,000 ounces more than the previous quarter and 12,000 ounces more year on year. This is despite the continued increase in positive COVID-nineteen cases reported at our operations. This performance was largely due to AGA Mineracao achieving 103,000 ounces in the quarter, showing that the mine has successfully adapted the additional ground support requirements. Staying in Brazil, Cerro Grande's performance was steady at 31,000 ounces and an all in sustaining cost of $9.12 per ounce, helped by a record farm throughput of 150,000 tonnes in August. Moving to Argentina, Cerro Vanguard delivered a consistent quarter on quarter production of 47,000 ounces during an extended national lockdown which started in March.
CBA has advanced their 2020 drill program, which includes 25 kilometers of diamond drilling to test the expenses of known veins and explore new targets in the district. Shifting to Australia, the region produced 149,000 ounces in the quarter, which was above the 146,000 ounces reported in the same quarter in 2019 and a significant 19,000 ounces higher than what was delivered in Q2 this year. The quarter on quarter improvement can be largely attributed to the new management team at Sunrise Dam, who increased production by 25% and lower total cash cost per ounce by 10%. Gold production at Tropicana mine was 75,000 ounces, which reflects the planned 13 percent year on year drop in grade as we progress stockpiles and begin waste stripping in the Mano Stage 1 cutback. Impact at treating stockpiles has increased the year on year all in sustaining costs to $10.94 per ounce although this was partly mitigated by operating improvements, including higher mill throughput and bringing the new Boston Shaker underground mine into commercial production.
Moving to Slide 23. Staying with Tropicana, I'm pleased to report that the Boston Shaker Underground Mine was delivered on schedule and on budget. Production was successfully ramped up to 65,000 tonnes during the quarter and will reach steady state production by the second half of twenty twenty one. The new underground mine will contribute around about 100,000 ounces of gold production per year over the next 70 years on a 100% basis. The decision was taken in June 2020 to progress the Havana Third Stage 2 cutback, which will allow access to deeper Havana orebody from 2022.
While the cutback is in progress, more feed will be sourced from Boston Shaker open pit and underground mine, supplemented by lower grade stockpile, which will result in near term drop in grades. Looking ahead, Tropicana will continue to deliver between 400,000 to 450,000 ounces of gold production 100% in 20202021 and will increase to between 450,500,000 ounces from 22 as the low grade stockpiles is replaced by higher grade ore sourced from the Boston Shake underground and the Van Nugh cutback. Moving to Slide 24. It's exciting to report that Boston Shaker and Turkicana orebodies have opened a dead. We are currently in a position to take full advantage of the potential for expenses in orebodies.
In addition, an underground drill drive is currently being developed from the Wasson Shaker Deep Line to create drill platforms to explore the Tropicana ore body. The first diamond drill rig has commenced drilling and if successful, we expect to be in a position to access ore as early as second half twenty twenty one. We will also continue to drilling down the at Boston Shaker and complete the trade off study between open pit and underground mining at the Vanner Deeps and Vanner South. Tokvikala's remaining open pit resource of around 3,000,000 will be mined over the life of mine in addition to the underground resource, which is about 2,900,000 ounces. Moving to Slide 25.
And returning to Sunrise Dam, the site team is focused to accelerate the development needed to create new drill platforms, which will allow us to identify additional ore bodies. The primary ore source for Sunrise Dam is large is the large bulk ore body, which can deliver a maximum of around 2,500,000 tonnes per annum at a grade of around 2.7 grams per tonne. The remaining mould capacity is currently filled with 0.09 grams per tonne marginal stockpiles and the immediate goal is to displace this marginal stockpile material with full grade ore from other ore sources. Suitable ore sources include open pit and Golden Delicious satellite deposit and approval has been given to begin pre stripping this deposit. Golden Delicious is situated about 12 kilometers from Sunrise Dam plant and expected to deliver about 136,000 ounces of gold production over the next 3 years, with first gold expected in Q2 2021.
We are also currently assessing the feasibility of various other prospective satellite deposits. In addition, our 30 underground drilling results have been extremely encouraging, which has led to an increase in the ore body envelope. This includes the recently discovered Frankie ore body within the western ramps and extensions to the Vogue and the Kheri share orebodies. Moving to slide 26 and looking ahead. It's imperative that we continue to drive our operational excellence program to get the most out of our assets.
As I've noted before, this includes increasing investments in oil reserve development and exploration drilling to identify additional ore sources across our operations. By way of example, the exploration program at Tubal has delivered encouraging intercepts in secondary ore bodies parallel to the main ore body and identified a new ore body called this converter near the existing mine. We have accelerated exploration activities and mobilized additional surface drawings. The additional drilling at CDS has confirmed the potential to scale up the Rosalina open pit, expand the Cristina mine and has identified a new ore body called Panu. At Cerro Grande, we have seen encouraging intercepts near existing infrastructure, including the additional high grade ore bodies to Jiro and extensions to other orebodies at this and continued success at the Palmyra South Denimans.
As I mentioned earlier, the drilling program at CVSA is also well underway and will increase to about 100 kilometers of drilling over the next 3 years. This has the potential to add 1,000,000 ounces of gold and about 7,000,000 ounces of silver resources. We have a clear path to create value by optimizing our existing operations and continuing to develop new growth projects to add new low cost ounces to the portfolio. In closing, the focus for 2020 remains unchanged. Prioritizing spend on development and exploration to improve resource confidence and identify new ore sources, growing near term reserves and creating flexibility, driving operational excellence to improve cost and efficiencies and developing new low cost projects to add to the portfolio.
With that, I'll hand over to Graeme, who will talk to Obuasi.
Thanks very much, Laudy. Hello, everybody, and this time, greetings from Obuasi. I've tried to find a quiet location, but with a bit of luck, you'll hear a truck rumble by from time to time. The outlook for Obuasi has not changed from what I've reported previously. We remain on track.
This year, we are operating Phase 1 at 2,000 tonnes per day. And for Phase 2, which provides capacity to 4,000 tonne a day, we are targeting commissioning in quarter 1 next year and ramp up to 4,000 tonnes a day in quarter 2 next year. Despite the COVID challenges, we have made good progress. The team has done an incredible job navigating the impacts of manufacturing and logistics delays and travel restrictions, and their commitment and dedication over this period has been quite inspiring. I'll talk to Phase 1 operational readiness first.
And here, we targeted the 2,000 tonnes a day. And in parallel, we're building Phase 2. Mining rates were constrained by still labor shortages caused by international travel restrictions, especially from Australia, though the focus on in country recruitment and training has helped bridge the gap. The mine plan has been revised to account for the COVID limitations of the past 6 months, and this plan achieved the required ramp up in production in parallel with the construction schedule. Good progress is being made in the second mine production area at Block 8 Lower.
The mill is performing well and is achieving the planned efficiencies. And importantly, resource reconciliations continue to show good trends. The drilling programs remain on track, and we have now grade controlled or proven all reserves out for 2 years and probable reserves out for 10. Our Q3 gold production was just over 46 1,000 ounces and total gold production so far is 95,000 ounces. We are tracking operating costs carefully and apart volume related variances, unit costs are tracking well to the feasibility study estimates.
Now on Slide 29. And for the Phase 2 construction, the photographs in the slide tell a story. In the process plant, concrete, structural steel, mechanical equipment installation has largely been completed. Piping, electrics and instrumentation works are well advanced. A pre commissioning has commenced on the mill and the regrind mill and in the gold room.
Earthworks for the buy option TSF and for the water dam is now well advanced. The KRS shaft and the materials handling system rebuild has progressed well. The rebuilt winder has now been certified by the regulator. Regarding the new ventilation shaft, the GCVS ventilation shaft, construction of the fans in the substation is close to completion. However, geotechnical issues has delayed the commencement of reaming of the shaft, which is expected to be completed in late quarter 1 next year.
From a cost perspective, the project remains on budget. As we move into 2021, there will be continuation of Phase 2 and that capital would be about $40,000,000 in 2021. As I've mentioned previously, there is a third phase to Obuasi's redevelopment and this involves the upgrade of the KMS and the BSBS shaft and the new ventilation shaft and underground dewatering systems. The total capital for that is $95,000,000 and is spread over 3 years, dollars 73,000,000 of which will be in 2021. I think the last point that I'd like to make is that we're landing the project into a good gold price.
When we announced the project in 2018, the IRR was 23% at $12.40 an ounce with a payback of around 6.5 years. In the current environment and allowing for COVID related issues that I've discussed, the IRR is 37% at $1700 with a payback of around 6 years and at $2,000 an ounce, the IRR ramps up to something like 46%. With that, I'll hand back to Christine.
Thank you.
Thanks, Graham. And the team and I look forward to joining you at Upper Yee soon. So just in conclusion, 2020 has presented us with a unique set of challenges. It has nevertheless been gratifying to see strong cohesion across the business with our global team working together seamlessly to ensure the business will be in the year in excellent shape, in fact even better than 12 months ago. We had a difficult start to the year from a safety perspective and we'll be looking to continue the strong recovery we see in the subsequent months.
We're also in a good rhythm with respect to COVID-nineteen with our clients embracing the protocols designed to maintain business continuity and keep people safe. As we progress in Q4, we're well positioned to deliver on our operational priorities. Cash conversion, especially from the DRC, will continue to be a priority for us even as we see the very strong cash flows coming from the remainder of our portfolio. Likewise, the recovery of the historical VAT receivables in Tanzania remains the focus. As we unwind our cash overhang complemented by the strong cash flow generated across the business will translate into enhanced returns to shareholders.
The operational and exploration team continues to clear this our board and the conversion initiatives where we've seen positive returns from our investments. And at Abu Dhabi, despite the hurdles during the year, we remain laser focused on the completion at Phase 2 construction at the end of Q1 2021. Likewise, we aim to progress our Colombian project within the first half of twenty twenty one with the aim of adding new low cost ounces to our portfolio. And we will not for a moment in managing costs and capital, ensuring we capitalize on the strong gold price environment. Our fundamentals are fast improving and we have a suite of catalysts in the short, medium and long term.
Our aim remains very clearly to build a solid predictable business that delivers value through the cycle. Thank you. And with that, Bill will open the call for questions.
Thank you, ma'am. Ladies and gentlemen, for those on the conference call today, The first question we have is from Shailan Nouri from UBS.
Afternoon, team. A couple of questions from my side.
I think that you
guys have done well for the during this year, during a difficult time. You've improved the cash position in the business. And I think that's partially what's driving the change in
the dividend
policy. Maybe give us some more color on the thought process you guys went through as a team and with the board when changing the dividend policy. The reason I ask question is because of the potential projects that you have on the cards coming next year and how does that play into your thinking? In case the gold price had to pull back, you'd effectively be leveraging up while paying dividends higher dividends than otherwise. So that's where the question is coming from.
The second part of the second question for me is just what's your thinking and position on the cash lockups that you have currently? So there's the VAT lockup in Tanzania and then there's the VAT lockup and a cash restriction or lockup in the DRC, just provide some additional color on that. And then if you can, I mean you mentioned that you're going to be increasing your exploration expenditure or converting more resources to reserves and getting more resources as well? Maybe just give us an idea of what you think the cost of that would be per year, so like in dollar 1,000,000 terms? Thanks.
Thanks for those questions, Chen. I'll ask Tim to take the last question. I'll deal with the first two questions. So I think certainly when we talk about our dividend policy, it's certainly within our this is how we look at our capital allocation framework is to ensure balance across 3 pillars within that framework. I think firstly, the first pillar is about reinvesting in our ore body to improve reserve confidence and self funding our capital requirements via brownfield projects or greenfield projects through the cycle.
Secondly, it is about our balance sheet and prioritizing debt reduction which we've done and that has actually positioned us at the lowest stake level in over the 10 year period. And then thirdly, it is about the dividend payout to shareholders, which to increase 20% of free cash flow before gross capital. So I think certainly when we looked at it and into discussion with the Board, we do plan prudently over the long term. Our diverse planning price is $1200 an ounce as we said. And so that is what's being captured in our plan.
We do have a revenue planning price assumption, which is just about $1400 an ounce. And what we've assumed is on clearly we're happy with where the debt is and clearly with improved cash flow we do see debt reducing further. And then we will be self funding our capital requirements. And so we're quite comfortable that the debt dividend payout can be sustained through the cycle. So I hope that gives you comfort regarding the dividend.
I think specifically regarding the cash lockups in the DRC, I think debt, the amount has increased by $66,000,000 in the quarter to $359,000,000 and that's ATA sheet. This represents 60% of the free cash flow generated by the body since the change in the mining code in late 2018. I think bear in mind the cash is available for Cavalli's use and it does fit in a dollar account in the name of the JV. So Barrick, who is our JV partner, who is also the operator, does continue to engage with the DRDC government both regarding the 2018 Mining Code and the cash repatriation and we do remain in close with Barrick in that regard. We certainly have acknowledgment by the government that they need to allow for their repatriation to encourage investment in the country.
And Barrick did receive a release a press statement last week with the CEO, Mark Briscoe, had recently had a meeting with the President of the ERC in countries. So, certainly, we are seeing during positive developments and we believe that it is a matter of time before we receive the cash. I think specifically relating to the VAT in the DRC, it does not fit in our working capital amount on the balance sheet, but there also we've seen the resumption of the tax and the fees for the agreement that was reached with the government in late 20 18. As regards to Tanzania, there is an historical VAT balance of $131,000,000 and that we are engaging with the tax authorities on as regards to the recovery mechanism. And we've had similar recovery mechanisms in Tanzania in the past.
And so we'll certainly see if you posted on that. I think specifically there was changes Ian spoke to changes in the Finance Act in Tanzania from July in July 2020. And so hence we're not expecting any further VAT lockups going forward because what the Finance Act allows is after following an administrative process that we are being able to automatically offset the VAT against corporate taxes. So, can I hand over to you with regards to the spend relating to the conversion?
Yes. And when you look at the spend that's related to reserve conversion, strictly on the spending for resource to reserve conversion, it ends up being about $60,000,000 to $70,000,000 in that range. And when you look at the entire exploration investment portfolio from both brownfields and greenfields investment, that will be in the range of about $170,000,000
So if you put them together, you're going to be looking at just under $250,000,000
Yes, bottom is about right.
Okay, perfect.
Thanks so much.
Thanks, Simeon.
Thank you. The next question we have is from Liam Fitzpatrick from Deutsche Bank.
Thank
you.
Sorry. On the Colombian projects, a couple of questions on those. So the it seems like we're getting closer to a decision there. Given the feasibility study results are expected in H1, when do you anticipate the projects could go forward for board approval? And then in terms of the development strategy, are you still planning to bring in an additional partner?
And is the likely path that you'll develop both of these projects simultaneously? And then on the CapEx side, I know we'll get detailed guidance early next year, but can you give us a rough kind of feel and range for sustaining CapEx next year compared to 2020? Thank you.
Okay. Thanks for those questions, Liam. I think specifically, I'll ask ask them to address the sustaining CapEx guidance on a dollar per ounce basis for this year. I think specifically on the Colombian project and certainly in terms of our debt, the GV. So you're correct in that we're targeting the completion of the feasibility studies of these projects within the first half.
We see Gramalote slightly ahead of Cebri Dollar. I think just bearing in mind that they do have a partner. We're also now the operator, which is both. It's a fifty-fifty partnership. And so certainly the feasibility study is targeted for completion by the end of March 2021.
And so also bear in mind that the project is already permitted and so that can proceed quite soon after Board approval. I think specifically relating to Crypra Donna, yes, we are targeting the feasibility study completed by the middle of next year. And in particular, also we're targeting receiving the environmental permit in that timeframe as well. As regards we are looking at building that project on our own. But I think as regards financing or risk mitigation options, I think that we saw historic.
And I think in particular in the form of pay agreement or supplier based financing and project financing. These are all part of what we are testing in the feasibility today. I think as I referred to the affordability on our balance sheet, I think certainly we are able to self fund our share in Granularity as well as the Cribadona project, but we're certainly not close to looking at other forms of financing as well. Okay. And then, Ian, on the sustaining side?
So, Liam, on the sustaining capital number, obviously, this year we flagged to the market, which we're looking at a range somewhere between $200 $2.30 per ounce with the additional $30 per ounce spent for the resource and reserve conversion. That process will continue. We said that's the multiple year investment in order to convert that. On top of that, you need to consider the new compliance requirements that's coming out, especially from Brazil on the sailing side, and we put that in the market update, the expectation of what that payment would be for us in the region of between $70,000,000 to $85,000,000 It's quite a step up from 20 20s levels of around 25 to 50. And that's a one soft step up in order to ensure compliance to the legislation that was promulgated in Q3 in Brazil.
And I think in addition to that, just bear in mind that there's also the continuing the first stripping drives that are carrying on at the Idioprim Tropicana as well as the O and D development. And OVIT will also start to play in on the same CapEx numbers because it would be the 1st full year where we would see same CapEx coming through and the shifting from growth capital to sustaining CapEx. Hopefully, that gives you a sense of what's happening on the sustaining CapEx side. Thanks. Okay.
Thank you.
We'll be in a position in February next year to give you more definition around we are aiming for longer than in year guidance, so expect the 2 year guidance next year in February
Ma'am, we have one final question. Are you able to take it?
Yes, we are.
Thank you. The last question we have is from Patrick Mann from Bank of America.
Hi, good day guys. Thank you for the call. I wanted to follow-up just on data and the longer term outlook. From what Sibylor was saying, it sounded like there's going to be a gap in open pits ore that's available until the new area is being stripped. Can you just kind of give us an idea of what it looks like?
Is it only underground or from now? And when will you be able to pull them all again? And then the second question is, you've seen very, very good improvements at Sunrise Dam and Mineral South as you guys have pointed out. How sustainable are those from here? Thanks.
Thanks, Patrick.
Thanks, Patrick. I think the way to look at data is that the office or the office surface for this year has been Nyankanga open pit, which depleted during the course of this quarter, Yankanga underground ore plus
then the
design comment also. So those are the 3 predominant also for now. And then on a cobalt basis, we've built quite a lot of topiles, high grade stockpiles from Nyingkanga when we finished Cut 8. We're really at the bottom of the pit, hardly any waste mining. So we build up stockpiles for that will last up about 12 to 14 months and those are the stockpiles that we carry out into 2021.
So going into next year, expect the stockpiles to be coming in. Then we have got Pancomet, we have got Nyanpala. And at the same time, they are opening up the 2 new mines of Ganta Hill underground as well as the Yamalalimo Open Pit area. Production wise, in terms of profile, this year certainly will be a record. I think this year will be, if not the highest in the history of the mine, a very strong production.
Next year, we'll see a slight pullback as we sort of set up the mine. And then 2020 2, then we should be back in the 500 to 600 ounce range in the production level. Thanks.
Patrick, it's Ludwig. Just to comment on your question around Sunrise Dam and the Brazil operations. The focus for the last year and continuing going forward is focusing on the ORD and that's to create the flexibility and also in the infill drilling to create that confidence in the ore body. And that's going to continue as we go into 2021. And what you've seen recently is actually the result of that extra flexibility that we've created in both these operations and also the confidence we've got we're gaining every month almost on the ore confidence.
So going forward, you will see short term fluctuations maybe, but we will continue with this progress in drilling and the flexibility. And we're confident that we will actually can maintain this, what we've seen in the last quarter.
Thank you both. Thanks very much.
Thanks Patrick. All right. So finally, I'd just like to thank you for joining our call today. And I'd also like to thank you for the support that you've given us during the past year. I think certainly it's quickly approaching, but I'd like to wish everybody the safe holiday season and we look forward to engaging with you at our nearing results in February next year.
Thank you and goodbye.