Good afternoon, ladies and gentlemen, and welcome to AngloGold Ashanti's 2018 Annual Results Conference Call. All participants will be in listen-only mode. There will be an opportunity to ask questions at the end of today's presentation. If you should need assistance during the conference, please signal an operator by pressing star and then zero. Please note that this conference is being recorded. I'd now like to hand the conference over to Mr. Stewart Bailey. Please go ahead, sir.
Thank you, Judith, welcome everyone to AngloGold Ashanti's full year and H2 2018 conference call. We have a busy schedule today, we won't waste too much time getting into it. What I would direct you to read first is our disclaimer, our safe harbor statement. It's important you should study it. Without further ado, I'm going to hand over to Kelvin Dushnisky, our CEO.
Thank you, Stewart, thank you to everyone joining the call. I've been in the role for about six months now, during which time, among other things, I've been immersed in our planning and budget cycles. This has given me a good look into the business and allowed me to make some changes which will be highlighted during the presentation. As I mentioned back in November, on a few occasions since, the portfolio as it stands is a little heavy and could benefit from some streamlining. This is something that will take a systematic and measured approach to, importantly, no fire sales. Our balance sheet and liquidity are in great shape, we're not pressed into anything. The divestments we're considering are for strategic reasons and to maximize efficiencies.
In this context, today, we've announced the beginning of a process for Cerro Vanguardia in Argentina to add to the process for Sadiola in Mali, which we announced late last year. The balance sheet's in good shape continues to strengthen, we believe the 1.5 times target for net debt to EBITDA is still too high for a producer of a single cyclical commodity. We brought that target down to 1 times through the cycle. Our return threshold for projects and brownfield investments is a 15% after-tax IRR at $1,200 gold price. This adds another layer of capital discipline into the decision-making process. Our dividend policy is the third layer of discipline, ensuring that shareholders get the first slice of our cash surplus before we invest in growth.
With our strict return metrics and leverage targets on one hand and dividend policy on the other, we're comfortable that we have the appropriate guardrails in place to ensure discipline. This means that not every project will go forward. We're going to be stubborn in our decision-making process, the reality is that some options in our pipeline won't make the grade and will be monetized as we pursue the highest return investments. We're 100% committed to meeting guidance always, we're taking steps to improve our planning so that we can provide longer-term guidance for the business. License to operate has steadily climbed the rankings as among the most pressing long-term challenges for the industry. For AngloGold Ashanti, it's been a top priority for some time. This is reflected in our performance across a broad range of metrics, as shown on this slide.
Safety is showing significant improvement, we still need to do better. Environmental management is also critically important and an area in which we're performing well, like safety, we always can do better and we must never be complacent, we won't. Speaking of safety, we should reflect for a minute on the recent tailings tragedy in Brazil. As a company with a large number of employees who live in the area, we've extended our deepest condolences to all of those who were affected. Ludwig is going to cover our own safety measures in this regard a little further in the presentation. Now turning to our results. The company performed very well in 2018. For the sixth consecutive year, AngloGold Ashanti has met or improved on every area of our guidance.
All-in sustaining costs for the full year has dropped below $1,000 per ounce to $976 an ounce, a 7.4% improvement on the prior year. Our international business ended the second half of the year with all-in sustaining costs below $900 an ounce. Our leverage has also continued to improve, now at 1.12 times net debt to EBITDA, down almost 20% year-over-year and moving closer to our new target level. In Q4 alone, we generated $85 million in free cash flow, even with once off items, loan repayments, and the slow remittances from the DRC due to the elections there. This shows that we're starting to deal with the cash conversion issues we faced, we expect to see more of that unwind through the course of 2019 and into 2020.
Productivity over the past five years is up by more than 50% rising, while every element of our cost structure is falling despite recent inflationary pressure. Our focus on margins is also paying off, with investment in previous years helping to achieve wider margins, even in a stable to flat gold price environment. While sustaining CapEx was lower year-over-year in 2018, we still continue to invest in operating improvements, which will deliver benefits in the years ahead. I'll hand over to Christine to walk us through the financials.
Good morning and good afternoon, everyone. As you've heard from Kelvin, our key metrics reflect a solid overall operating performance as well as focused cost and capital discipline, which underpinned our improved free cash flow generation. Production from retained operations after stripping out the South African region asset sales and closures increased by 2% compared to last year. All cost metrics continued trending towards the bottom half of the global cost curve. The inflationary pressures we've seen were more than offset by weaker currencies, operational excellence savings, and lower capital expenditure.
All-in sustaining costs for the year came in at $968 an ounce, with H2 at an impressive $936 an ounce supporting the improvement. Our clear aim of improving margins by focusing on the controllable factors in our business through operational excellence helped us achieve a healthy all-in sustaining cost margin of 23%, a strong improvement on the prior year margin of 16%. The marginally higher gold price and improved sales volumes on retained operations benefited both adjusted EBITDA of $1.48 billion and free cash flow. Free cash flow for the year of $67 million, which excludes the $309 million proceeds from the South African asset sales, improved significantly. This was despite delayed cash repatriation from Kibali of $55 million, Argentina export tax receivables of $14 million, $61 million relating to the South African region restructuring costs, and $10 million relating to the refinancing of the $1.4 billion multicurrency credit facility.
Overall, free cash flow for the year, excluding the abnormal South African region retrenchment costs and the once-off refinancing costs, is $140 million. On a positive note, VAT receivables in Tanzania were largely steady as we offset $33 million in historical VAT. The recent VAT agreement in the DRC is another positive development where the government has committed to a $60 million cash refund to the Kibali JV in respect of historical amounts owing. The JV received a VAT refund of $6 million towards the end of 2018, and the balance will be offset against all forms of future taxes owed. Any future build-up of VAT receivables will be curbed once the president signs the legal mechanism to exempt the JV from VAT for the purchase of local goods and services.
The South African business was free cash flow positive in H2, despite funding retrenchment costs of $22 million during that period. The final tranche of restructuring costs in the South African region amounts to $1 million and will be paid during Q1 of 2019. With the first phase of our South African region restructuring now complete, the focus has shifted to reducing legacy costs in order to rightsize the cost base to the smaller footprint and drive further operational efficiencies through improved productivity. Chris will elaborate on this a little later. Total capital expenditure of $721 million was 24% lower than the prior year, despite the increase in the Obuasi and Siguiri project capital.
Sustaining capital expenditure of $571 million for the year was 31% lower year-on-year due to the peak of our inward investment last year, savings from operational excellence, and the now closed and sold South African operations, as well as favorable currency effects. Moving on to slide 10 on the cost performance. Looking at the cost performance in detail for H2 year-on-year, our cash costs continue to improve to $726 an ounce or 8% lower than the prior year. These benefited from the South African asset sales and closures, weaker currencies, operational excellence efficiencies, and an overall improvement in volumes and grades. Inflationary pressures continue to prevail across the emerging economies that we operate in. We also saw higher mining costs relating to Geita Underground, higher royalties at Geita, Brazil, and Kibali, and the additional 1% clearance fees at Geita.
All-in sustaining costs in the second half were 10% or $102 an ounce lower year-on-year at $936 an ounce, due mainly to lower cash costs and sustaining capital. All-in sustaining costs for the international operations were 5% lower at $920 an ounce from $972 an ounce in 2017, with H2 coming in at an impressive $895 an ounce. We expect to sustain a large portion of these cost savings, and Ludwig will provide more color on the nature of the savings achieved. All-in sustaining costs for South Africa in ZAR terms were 7% lower, reflecting the benefits of the portfolio restructuring. In US dollar terms, all-in sustaining costs for the South African operations for the year were 5% lower at $1,178 an ounce, with H2 reflecting an improved all-in sustaining cost of $1,033 an ounce for the South African business.
To protect the cash flows of the South African business, we've implemented a zero-cost collar revenue protection mechanism for 2019 at between ZAR 545,000 a kilo to ZAR 755,000 a kilo, covering 300,000 ounces of production. This will provide a degree of revenue certainty while we focus on the phase 2 of the business restructuring. Moving on to slide 11. Our balance sheet strategy continues to enforce capital discipline with net debt at $1.65 billion, the lowest level since 2012 and 17% lower than last year. Our net debt to adjusted EBITDA ratio of 1.12 times reflects ample headroom to our 3.5 times covenant. Liquidity remains strong, providing good flexibility in a volatile climate. The refinancing of the US dollar and AUD RCF facilities into our $1.4 billion single multi-currency facility was concluded in Q4 2018.
That means that the only near-term maturity is the $700 million April 2020 bond. With the US dollar facility completely undrawn and significant cash balances at year-end, we have flexibility in deciding on refinancing options for the bond. We have lowered our net debt to adjusted EBITDA target to 1x through the cycle, taking into consideration that we have been below the target of 1.5x since 2016. That reflects declining net debt levels in the group on the back of improved free cash flow generation and asset sales. A lower net debt to adjusted EBITDA target signals our intention to further deleverage the balance sheet on a self-funded basis, whilst keeping our capital allocation framework intact. That means making wise capital investments on both brownfields and greenfields projects and maintaining the dividend.
We remain strongly levered both to the gold price and currency. We expect cash flow generation across the business to continue to benefit from current market conditions as well as from efficiency improvements in our business. A cash dividend of the equivalent of $0.07 per share has been declared by the board, which is in accordance with our dividend policy to pay 10% of free cash flow, pre growth capital. In addition, the board exercised its discretion by adding back the South African region restructuring costs of $61 million to free cash flow in determining the dividend. Finally, our credit ratings remain intact, with Moody's at an investment grade rating with a positive outlook, and S&P at one notch below investment grade with a stable outlook. Moving on to guidance for 2019. We're guiding production at 3.25 million ounces to 3.450 million ounces.
We've kept the top end of the production guidance range intact compared to last year. We lowered the bottom end of the range compared to 2018. This adjusts for the South African asset sales and closures, the anticipated sale of Sadiola, and lower expected production from CVSA. These factors are partly compensated for by increased expected production from Siguiri. In line with past trends, production is expected to be weighted to the second half of the year, with strong performances expected from Geita, Siguiri, and Brazil in the final six months of the year. We remind you of the usual caveats to our guidance relating to power, labor, regulatory, and other disruptions. The cash cost and all-in sustaining costs guidance ranges reflect improvement compared to 2018, capturing weaker currency and current commodity price assumptions.
Other operating expenses are estimated at $85 million and includes care and maintenance costs for Obuasi and the South African region. Our currency exposure across two-thirds of our portfolio continues to provide a natural hedge to inflationary effects and to the volatility in the gold price. However, we remain sensitive to changes in currencies and commodity prices. The estimated impacts based on the assumptions provided on all-in sustaining costs and cash flows are provided with a health warning. Total capital expenditure is guided at $90 million to $990 million for 2019, which includes the peak funding requirement for the Obuasi growth project.
The total project capital of Obuasi is anticipated to be $495 million to $545 million, which includes $45 million for the mining fleet purchase. Of which 10% of the total capital was spent in 2018, 60% will be spent in 2019, and 30% will be spent in 2020. The remaining growth capital relates to advancing the feasibility study for Quebradona, completion of the Siguiri Hard Rock project, which Ludwig will talk to, and expected to be ramped up by mid-year, Tropicana and Mponeng. Sustaining capital expenditure of $520 million to $560 million amounts to approximately 55% of the total capital budget in 2019 and is estimated at approximately $160 an ounce. It is at the low end of the industry range, noting that the brownfields inward investment program was completed in 2017. I will now hand over to Ludwig to talk about the international operations.
Thank you, Christine, good day, everyone. We're on slide 14. Last year, production from our retained operation was up just over 2% from 2017. Continental Africa gave another strong performance, with high underground tonnages and grades at Kibali and Geita lifting the results. Iduapriem increased production by 11% year-on-year, thanks to improved grades and throughput from the Teberebie pit. The strong performance was partially offset by lower tonnages treated at Siguiri, and that was caused by mining harder material. The Americas saw a drop in production over 2017, mainly at AGA Mineração. The Cuiabá complex faced some development and infrastructure constraints through the year, but we started to see improvements during the fourth quarter on improved stope availability, drilling rates, and recoveries. At CDS, we saw lower grades in the sulfide operation, while heavy rain affected open pit production.
Australia had a good year, with production up 21% at Sunrise Dam on rising volumes from Butcher Well. At the same time, we struggled a little to achieve the targeted recoveries from the REP project immediately after commissioning. At Tropicana, the second ball mill was commissioned ahead of schedule in November and is delivering the planned increase in throughput and recoveries. Chris Sheppard will cover the performance from South Africa later in this presentation. Turning to slide 15. We saw another good cost improvement, with all-in sustaining costs down 7% to $976 per ounce, with benefits from lowering sustaining CapEx and improved efficiencies. Operational excellence initiatives in Americas region and weaker local currencies helped lower costs. In continental Africa, our cost benefited from the strong production and also the operational excellence interventions.
During 2018, we completed a number of brownfields investments, including the new power plants at Geita and Siguiri, the cutback at Iduapriem, and a new plant at Siguiri. At Sunrise Dam, costs were higher due to the once-off improvement projects, including the recovery enhancement project, the REP, increased ore development at Butcher Well, new ventilation facilities, and an expansion on our central tailings facility. The mine is set up well for the years to come. International operations' all-in sustaining costs improved by $52 an ounce to $920 an ounce in 2018, demonstrating the impact of operational excellence. Turning to slide 16. Looking forward into 2019, we expect another solid operating year from continental Africa. At Geita, we're seeing a stable production trend as we continue to invest in underground development and exploration.
Mill maintenance is underway this month, we expect a slow production start with 60% of the 2019 output in the second half of the year. At Siguiri, the focus for the year will be to stabilize the plant throughput and operating stability as the new plant is commissioned. Now that underground production has ramped up at Kibali, the team will aim to replace reserves through brownfields exploration. To slide 17. At AGA Mineração, we expect improved grades this year, resulting in higher production. Reserve conversion is our clear focus. At Serra Grande, the mining of the crown pillar will lead to higher grades towards the end of the year. I would like to make a quick comment about the company's management of its tailings facilities. We have a clear framework that sets principles, standards, and guidelines for construction, management, and oversight of our TSFs.
It is our obligation to ensure that our tailings facilities are stable, non-polluting, and contained. We are guided in this regard by the international best practice and conduct regular detailed inspections by internal specialists and independent third-party experts, as well as ongoing monitoring and ongoing preventive maintenance. Turning to slide 18. Moving on a year ahead in Australia, at Sunrise Dam, the focus will be on stabilizing the REP project, which we expect to boost recoveries by around 6%. At Tropicana, we expect the strong performance to continue, and we think there might be upside to that as the ball mill appears to be capable of delivering higher throughput and recovery than planned. We are looking at the possibilities to improve output. I will now hand over to Chris Sheppard, who will take you through the performance in South Africa.
Thank you, Ludwig. Good day, ladies and gentlemen. Turning to slide 20. 2018 saw the conclusion of the third wave of restructuring within the South Africa region business at year-end, following the sale of Moab Khotsong, and Kopanang mines in quarter 1 2018. During the second half of 2018, we sold the AngloGold Ashanti Hospital, the pharmacy, chemical laboratories, and the Vaal River rail transportation network, which assisted with job loss avoidance measures. Of the 2,000 jobs that we contemplated in our May 2018 restructuring announcement, we finally applied compulsory retrenchment to some 70 employees. As a consequence of these actions, it's pleasing to note that the South Africa region portfolio returned to free cash flow generation in the second half of last year.
From a production perspective, production from the retained operations was up some 2% year-on-year. Mponeng performed well, assisted by higher than planned grades and improved workplace compliance. Looking into 2019, production from the retained operations is expected to see a slight improvement year-on-year, with all-in sustaining costs expected to drop below $1,100 per ounce. Mponeng is expected to see grades reduce year-on-year in accordance with the predicted grade model, along with higher output as planned productivity improvements kick in. Unit costs are expected to benefit from improved mining practices and the new shift arrangement. Our Mine Waste S olutions operation is expected to see a slight improvement in both grades and throughput and recovery, ultimately leading to an improvement in margin. Turning to slide 21, I alluded to the restructuring of the SA asset base on the previous slide.
To be clear, without the constructive approach and engagement of all our stakeholders, we would not have been able to conclude the significant reduction in labor and associated costs. The restructuring costs incurred in 2018 totaled some $61 million and facilitated the return to free cash flow generation in the second half of 2018. Efforts will continue in 2019 to realize further cost reductions within the off-mine cost structure, focusing on systems and work process streamlining. Mponeng implemented a new shift arrangement in quarter 4, which should be fully embedded by the end of quarter 1 2019. To recap, the five-day work week, 11-hour per shift arrangement for production teams and supervisors allows for substantial increase in face time, allowing for planned work cycle activities to actually be realized, resulting in improved safe production levels. It's early days yet, but encouraging signs are evident with buy-in from all stakeholders concerned.
I'll now hand over to Graham. Thank you.
Thank you, Chris. Today, I'll provide an update on progress on the Obuasi redevelopment project and a summary of the Colombian Quebradona project, which the board approved the pre-feasibility study and the progress to feasibility. Slide 23. You'll recall that the Obuasi project is being tackled in two phases. The first phase is to recommence mining and refurbish the plant to achieve a production rate of 2,000 tons per day. This is on track for first gold at the end of this year, and production in 2020 at 2,000 tons per day. The second phase is about ramping up mine production and the construction of new facilities to achieve 4,000 ton a day. This is on track for completion at the end of 2020, and production at 4,000 ton a day from 2021.
The operations and the construction teams are now fully established on-site, and the design of the operating systems for geology, mine technical services, and mining has been completed. At the end of 2018, the operational readiness program was 25.4% complete. At the end of January, design of the new elements is 51.7% complete, and procurement is 53.2% complete, with work prioritized to the critical packages and the long lead items. The phase 1 critical items have been ordered, including the BIOX cooling tower, the jaw crusher, and the grizzly feeder. On slide 24, with a few photographs, the mining fleet has now been delivered to site. The mining contract is established on-site, and underground development has commenced. First development blast was achieved on the 1st of February. This was quite a milestone for the team on-site. Everyone on-site, as you could imagine, were quite excited about a first blast.
The mine had been rather dormant for the last few years. Demolition of old sections of the plant is advancing safely and a little bit ahead of schedule, and is now 45% complete. Construction of the mining contractor's camp is well advanced, and refurbishment of housing for the Obuasi workforce is progressing quite well. On slide 25, on the 22nd of January, the President of Ghana and the Asantehene, or the Ashanti king, launched the redevelopment project in front of a very large gathering of elected and traditional leadership, the community, our employees, and contractors. Both the king and the president were quite effusive about their comments on the project and were complimentary about AngloGold having stayed the long course and having worked constructively with government and with the community to bring about the redevelopment.
Consistent with our commitments to the government and the community, we are very focused on Ghanaian participation in the project. Recruitment is focused on Ghanaian employees, focusing on local communities. We're also looking within Ghana and even offshore, as many Ghanaians work globally. Where we have imported specialist operational, managerial, and technical skills, these have been matched with Ghanaian successors who will be developed during the course of the project. The five-year mining contract was awarded to the Underground Mining Alliance, a joint venture between AUMS and Ghana's Rocksure International. The contract will employ and train about 500 Ghanaians. On slide 26, turning to Quebradona. The pre-feasibility study has recently been approved by the board, as I mentioned, we're now progressing to feasibility. Quebradona is an underground copper-gold project situated in the municipality of Jericó, approximately 100 km southwest of the city of Medellín.
The ore body is a subsurface copper-gold porphyry, it lies within an escarpment. Mining would be by sub-level caving, access and material transport is via tunnels from the valley. The process plant and infrastructure are positioned in the valley close to the bottom of the escarpment. On a few highlights of the pre-feasibility study on Slide 27, the planned mining rate is 6.2 million tons per annum over 23 years, at an average grade of 1.2% copper and 0.66 g per ton of gold. Comminution will incorporate high-pressure grinding rolls and single-stage ball milling, very similar in scale and design to the Tropicana circuit, which has operated very well. A copper-gold concentrate will be produced through conventional flotation. The concentrate is very clean, from our market research is expected to be well-received by smelters.
With an all-in sustaining cost of $0.88 a pound of copper, with capital costs of $990 million approximately, the all-in cost is $1.24 a pound, providing a healthy margin to the forecast long term and current spot gold-copper price. The project return, including the cost of the feasibility study, is estimated at 16.8% at a copper price of $2.90 per pound and $1,240 an ounce for gold. At the current spot copper and gold prices, the return is 16.4%. At $3 a pound, the long-term view of many copper producers, the return increases to 17.5%. As we move into the feasibility study and the permitting phase, we will be significantly increasing our engagement with the local community and other stakeholders, for whom modern mining will be quite new.
Finally, we're pleased to announce the maiden ore reserve for Quebradona of 2.8 billion pounds of copper and 2.2 million ounces of gold. For more details, I refer you to a separate press release on the ore reserve. With that, I'll hand over to Tim. Thank you.
Thank you, Graham. Hello, everyone. On slide 29, we'll speak to the year that we had in terms of resource and reserve addition. 2018 was a great year for the project team at Quebradona, as Graham already mentioned, and also for our generative and our mine site exploration teams across the portfolio. We completed 2018 with a net increase in ore reserves after depletion on a portfolio-wide basis. We continue to unlock value from our investments in Colombia, as well as make significant gains at our mine sites from exploration and cost reduction initiatives. As Graham mentioned, we declared our first copper ore reserve of 2.8 billion pounds at Quebradona, and our mineral resource portfolio remains stable as a source of optionality as we continue to push conversion of mineral resources to ore reserves throughout the company.
On slide 30, our generative and mine site exploration programs were active across the portfolio, delivering ounce additions at a favorable $34 per ounce unit cost from our international group since AngloGold was formed in 2003. We have active exploration hubs in Australia and North America, with drilling programs in progress in both areas, and a target generation focus in South America and West Africa. In Australia, we were quite pleased that an internal stage-gate review following the H1 drilling program at the Butcher Well joint venture with Saracen near the Sunrise Dam mine supported AngloGold completing earn-in to 51%. We will continue to advance project work over the next 12 to 18 months to establish a first mineral resource and prioritize any necessary permitting to access open-pit oxide targets while we establish access for underground exploration and development. We also completed a successful field season in Queensland.
At all the areas we secured following target generation based on analysis of new data sets available. We expect drill targets to be defined following a review of our own positive sampling results and geophysical survey anomalies identified. In North America, our year ended with winter drilling programs in progress at both our Minnesota and Nevada project areas. In Minnesota, we have a rotosonic drilling program in progress where we're collecting samples to prospect below the till material, covering a broad area identified as prospective for gold deposits by our target generation process.
In Nevada, I hardly need to explain why we are excited to have exploration progress in the prolific Walker Lane trend. At the Silicon project, we have approximately 17,000 meters of core and reverse circulation drilling in progress, testing targets generated in the past 18 months by our North America-based exploration team with support from our global specialist team. We expect to complete stage-gate reviews of these projects following logging, sampling, and receipt of assays to determine whether we advance these programs with additional drilling after the stage-gate review. Target generation activities are ongoing in South America and West Africa, as I mentioned earlier. The intention is to provide new projects for our portfolio. We are also active across the portfolio with our mine site exploration programs, and the next slide provides highlights for some of these results on slide 31.
Our positive exploration results in 2018 continued to support stable mine plans across the portfolio, along with steady transition for mine sites where underground operations have commenced or are planned in the near term. The highlighted results provided here speak to the health of our assets and the pipeline of mineral resources undergoing conversion beyond our current ore reserves. Moving to slide 32. In this slide, we see the continued development of our exploration project pipeline of generative and mine site programs in every jurisdiction where we explore, with additional early-stage projects coming out of the work of target generation teams in each region. This supports and complements the ongoing mine site exploration and development programs underpinning the stability of our portfolio. Moving to slide 33.
We have a focus on the Geita Gold Mine, and it's in the process of transitioning from open pit mining to most ore being sourced from underground mines over the next few years. As you can see in this slide, the resource extensions of the ore bodies at both Nyankanga and Geita Hill deposits continue from the drilling completed at surface below the current open pits. At Nyankanga, that is being further defined by underground drilling from underground platforms. The results observed show that similar gold mineralization continues down plunge from the ore mined in the open pits. Moving to slide 34. We see similar ore body extensions in the Star and Comet area where underground mining is in progress in both the Cut 2 and Cut 3 areas.
We also have additional underground targets in the Ridge 8 and Roberts areas, where we expect to progress with additional drilling in upcoming years. Last, the Geita team has advanced exploration a few kilometers northwest from Star and Comet, where they have a target emerging at Saloo that may provide a surface mining opportunity with additional potential to develop down plunge extensions, as we've seen in the other ore bodies as another potential underground mining prospect. We will continue to advance all of these projects through the stage-gate process. Moving to slide 35. We're excited about the new and continuing exploration opportunities resulting from the work of our generative and mine site teams in 2018. 2019 will be another active year across our exploration portfolio, a few of the highlighted programs for the year out of our project pipeline are shown here on this slide.
We expect roughly $30 million to be allocated toward generative programs, while the remaining bulk of our exploration budget for the year is planned for resource conversion and new resource addition projects at our mine sites. Now back to Kelvin.
Thanks, Tim. As I mentioned before, we place a high premium on focus. With the smaller South Africa footprint and also the processes underway in Argentina and Mali, we've decided to make some organizational shifts to support that emphasis. It's an opportune time to do this given the planned retirement of three valued members of our executive team, Charles Carter, David Noko, and Chris Sheppard. We offer them our deepest thanks for their distinguished service and our wishes for all the best in whatever the next chapter will be for each of them. We've now reorganized our two operating units, sorry, into International and Africa divisions, with the Africa unit incorporating South Africa. Ludwig Eybers will maintain responsibility for the international portfolio and exploration. This includes Australia, the Americas, and the Colombia projects.
The Brazilian and Australian operations in particular, have significant potential to improve and will benefit from Ludwig's deep experience, his focus, his broad understanding of the business, and those assets in particular. The Africa unit will be led by Sicelo Ntuli, a top member of our operations team who's worked at the underground operations at Mponeng and has also had an extended period at Iduapriem, during which time the mine recorded strong operating and safety results. For the past two and a half years, Sicelo has held direct line responsibility for an improving Continental Africa portfolio. He's been an exceptional performer in the company for almost 2 decades and will be a strong addition to our executive team. Moses Madondo, who distinguished himself as head of our Vaal River assets before their sale last year, will assume responsibility for our South Africa business.
Moses, a seasoned mechanical engineer, is another of our exceptional homegrown leaders who has established an excellent track record during almost 20 years with the company. We have a high degree of confidence in him. Stewart Bailey, who many of you know as our Senior Vice President of Investor Relations and Communications, will assume the role of Executive Vice President, Corporate Affairs, where he will head the team of experienced specialists in the broad area of stakeholder relations and sustainability, which will continue to include investor relations and communication. His knowledge of our assets and operating geographies and close cooperation with sustainability teams over the years provide a strong foundation for the role. Finally, I'm pleased to announce the addition of Pierre Chouinard as Executive Vice President of Strategy and Business Development.
Pierre is a seasoned executive from the Rio Tinto organization, where he was head of business development and also general counsel for its aluminum unit. Pierre brings decades of commercial and business development experience in the metals and mining industry and an in-depth knowledge of the gold sector from a number of senior roles he's held in this space during his distinguished career. Pierre will work alongside an excellent corporate development team here in Johannesburg and round out a highly talented and motivated leadership group as we work to unlock the value in the business. We place a premium on clear and uncompromising capital allocation as well. This means that certain investments may not be made if the returns they offer rank below other opportunities in the portfolio. As we look across the portfolio, Cerro Vanguardia in Argentina is the next asset we'll explore selling.
As with Sadiola in Mali, Argentina has been an excellent jurisdiction for the company for almost 2 decades. With competing demands for capital, another owner may be better placed to invest in extending the life of these assets. As we divest of these operations, we'll replenish the portfolio with lower cost, higher margin ounces from Obuasi as it ramps up through the course of next year. In order to sustain value creation over the longer term, without resorting to expensive and complex M&A to replenish the portfolio, it's important to ensure consistent investment in exploration. Tim gave a good overview of how we intend to do so. We'll continue to invest in exploration to be sure the pipeline remains well-stocked. We'll work hard to optimize projects to achieve our 15% return rate at a $1,200 an ounce gold price, and those that don't, we'll monetize.
For those that go ahead, we'll look at a range of financing options to ensure that cash generation and direct return to shareholders aren't always pushed into the future. Let me finish with some points on how we intend to run the business. We'll continue to place a clear emphasis on getting the basics right. That means meeting our guidance always and strengthening our license to operate. We'll keep a sharp focus on costs and managing capital. We'll build on recent efficiency improvements using operational excellence across the business to continue to move down the cost curve. We'll continue to work hard to eliminate leakage that impacts cash conversion, especially in care and maintenance costs and working capital lockups. A near-term example of this will be the roughly $60 million in annual care and maintenance costs that we've been spending on Obuasi.
That figure will be lower this year than in 2018 and will end altogether in 2020. We'll continue to streamline and focus the portfolio. We'll invest wisely to progress our exploration pipeline and projects. As we do that, we'll ensure we move our two key Colombia projects up the value curve. We'll ensure Obuasi comes in on time and on budget, as Graham explained. In fact, Obuasi's redevelopment is a top priority this year. We'll do it prudently, mindful this is a long-life mine. In fact, we're hosting a tour to Obuasi the week of May 27th, which some of you may like to attend. Our vision's clear, a solid, predictable business that will deliver through the cycle. With that, we'll open it up for questions, and just before we do, I'd like to apologize for the length of the presentation.
It'll be a little less comprehensive in the future. Thank you very much. Now we'll turn to questions.
Thank you very much, sir. Ladies and gentlemen, at this time, if you'd like to ask a question, you're welcome to press star then one on your touchtone phone and that'll place you in the question queue. If at any time you decide to withdraw the question, you're welcome to press star then two on your touchtone phone to remove yourself from the question queue. Just a reminder, should you wish to ask a question, you're welcome to press star and then one. The first question comes from Tanya of Scotiabank.
Good afternoon, everybody. Hi. Hello?
Hi, Tanya. We can hear you.
Oh, okay, good. Perfect. Thank you, Kelvin. I have a few questions. I'm going to start from the technical side. Maybe someone can give us a better idea on how some of the operations are going to perform in 2019 over 2018. We had a little bit of guidance on the South African mines that they're going to do a little bit better versus 2018 at lower all-in sustaining costs, maybe some of the other divisions. That's my first question.
Okay. Keep going, Tanya. I'll note the questions, and we'll deal with them one by one.
Okay. The second one would be for Christine to just review with us some of the big capital items on the development front. The sustaining, but just some of the big ones. Obuasi clearly would be a big one, and you've given us guidance there, but just any of the other key items, key mines. Then the third would be on Okay.
Sorry, Tanya.
I'll continue on my third one. My third one would be just on sort of your philosophy to do with La Colosa and Quebradona, whether that actually fits your portfolio, especially because Quebradona is really a copper mine, copper project, and how do you see that fitting in? Where does Gramalote fit in here? We didn't really hear about that one. I'll start with those three.
Okay. Well, Tanya, thank you. Maybe we'll start with the first one regarding the operations moving into 2019 from 2018. I turn to Ludwig, if you could respond to that, Ludwig.
Hi, Tanya. I'll start with the Americas side, the Brazil side. We'll see a bit of uptick in the Brazil operations from last year. That's from basically on the back of better grades at Cuiabá. Argentina will be a little bit lower than the previous year. That's also on the back of grades. Going to Africa, we're basically flat with a little bit of uptick in Continental Africa, especially now that we've got the combination plant in Siguiri that's operational. We'll see a bit of uptick in that. Geita will still be performing, even a little bit better than the previous year. If you look at Australia, it would be fairly flat except for at Tropicana, where we expect a little bit of an uptick on the production.
In terms of costs, we're looking at very much the same kind of costs with a little bit of a cost saving from the previous year. That's on the back of operational excellence and depending on what the exchange rates do in the different regions. We keep on driving the cost down as we've done the previous year.
Maybe Ludwig, just on the cost, if I could. I think we heard several times inflationary pressures. I think Christine mentioned those. Can you just talk about what you're seeing as inflationary pressures in your cost structure around the world?
I think that the biggest one that's actually now showing itself is basically fuel. That's the one that we're actually very cautious about. Obviously, with the operational excellence, we try to offset that as far as possible. I think we've seen the commodities turn, there is a bit of a pressure on most of the commodities, but especially fuel. That's the biggest impact.
Okay. Nothing on labor?
Labor, basically close to the inflation over the longer term, it actually gets balanced by the exchange rate, I think, in most of the areas.
We've also entered into labor agreements last year, places like South Africa, Siguiri, elsewhere. That's positive.
Yeah.
I was thinking more of Australia, Kelvin.
Okay.
In Australia, the labor is basically every year goes around 2%. It's basically just on the inflation.
Right.
There's no real pressure on that.
Great. Christine, do you want to.
Okay, thank you
touch on capital?
Yeah. If I can just add to fuel, what we have done for the 2019 year ahead is we have entered into a zero-cost collar hedge to protect us against the increase in fuel prices within a range. We've hedged about a third of the fuel consumption, particularly relating to continental Africa, but it amounts to a third of the fuel consumption in the group. It's done within a range of a floor of $56 a barrel and a call option at $82 a barrel. We've tried to protect ourselves against increases in that. To move on to the capital question, I think clearly I've said the overall capital guidance is $910-$990. Of that, growth capital is $390 million-$430 million. That's the total range for growth capital. I've given you the figures as relates to Obuasi.
I said 60% of the $490 million-$545 million spend will be spent in 2019. Of the remaining growth capital then, in the ranges that I've actually given you, the spend will really be relating to Tropicana. I can give you a range of possibly $20 million-$25 million there. Then we've got the completion of Siguiri, but there's also block 2 within Siguiri. There's a smaller sort of overflow from 2018 relating to the completion in the current year. There, I think that would be around $10 million. Then we've got Quebradona. Like we said, it's moved into feasibility, and the spend envisaged there for this year is about $15 million relating to that. On the sustaining capital buckets, I've spoken to the range. I think importantly, it's $520 million-$560 million and estimated at $160 an ounce.
Your bigger buckets relating to the sustaining capital spend really pertains to Brazil. I think there is a range of about $140 million-$160 million in terms of sustaining capital spend. The other bigger bucket is Geita. Then once again, we've got Australia. Geita, it's a bit of an uptick, probably 15% higher than what the spend was last year. Then we've got Australia, lower than last year's levels. Sorry, I have to guide you because I can't give you the exact numbers. These are still budgets.
Yeah, no worries.
It's lower than last year's levels of spend, but they are the bigger buckets of sustaining capital spend. Then, of course, we've also got sustaining capital spends in South Africa.
Yeah.
Okay, perfect. Thank you, Christine.
Tanya, I'll go to the third question then, the philosophy around the Colombian projects. Let me start with La Colosa, which is easiest. Look, that's a project that is, in essence, on hold. It's in force majeure where it's not a priority and we're not spending much money. We're holding the asset, spending about $1 million to do that next year. It's not a priority asset for us at this point. Quebradona and Gramalote are. Maybe I'll start with Gramalote. We did increase resource drilling in 2018, which we've received encouraging results from, and we're now completing the resource model. Stay tuned. We'll look forward to updating on Gramalote soon.
I can tell you that ourselves and our partner, B2Gold, who's a great partner for that project, I think we're both equally enthusiastic about what we're seeing, but we don't want to get ahead of ourselves. We'll look forward to updating on that. Quebradona, I mean, you're right. It's large. It's got 2.8 billion pounds of copper, 2.2 million ounces of gold at this point. We think that will grow. We think that it's a project where we can unlock value by taking it through feasibility study. At that point, you shouldn't be surprised if we decide to look at bringing in a partner to develop La Colosa-- sorry, Quebradona. That's a project where we think there'll be a lot of interest.
One of the features of Quebradona that we've seen through the pre-fees is that it would produce a very clean copper concentrate, which will have high marketability. It's early days, but we are enthusiastic about what we see in the pre-fees. We hope to continue that trend with the feasibility study, but on a going forward basis, again, shouldn't be surprised to think of us partnering on that one.
Yeah. It's just there's almost $1 billion. I just wonder whether $1 billion is better allocated to other parts of your portfolio. Maybe just on the social issues there, Kelvin, how are those going?
Well, like a lot of places, Tanya, it's early days, so there's lots of work ahead of us, both on the fees and locally with communities to ensure that we have gained community support. Look, it's not uncommon for a lot of projects in Latin America early on, in particular, to see local opposition to projects. In the case of Quebradona, it's actually been a very peaceful and calm process that we've been going through. Our objective over the course of the next year is to spend time on the ground working with the communities. I've met our team, and I'm confident in their ability to ensure that we're characterizing the project properly. In other words, this project can be built responsibly with environment, social matters in mind. So we'll work through a process.
At the end of the day, we have to ensure that we have local support. If we do, then it's a project we'll proceed. If we don't, then we won't. It really is that simple, but we're confident that we'll get there.
Okay. We're looking forward to hearing more about it.
By the way, Tanya, on the capital, the number you quoted, that's one of the reasons we would consider bringing in a partner.
Yeah. It's a lot of money.
Well, it's a good project at this point. We'll see.
Okay. Thank you.
You're welcome.
The next question comes from Patrick Mann of Bank of America Merrill Lynch.
Hi. Good afternoon, guys. I might set the cat amongst the pigeons here a little bit. If you look at the gold industry overall, there's obviously been two, I suppose, mega merges and a lot of companies looking to offload what they're saying is non-core assets. Kelvin, you've obviously been around the industry a lot and have a lot of experience at different operators or at a different operator in particular. I know that you've got a lot on your plate organically and from a brownfields perspective, but it definitely feels like a buyer's market with everybody looking to offload assets. Is there any realm of possibility at which you'd look at acquiring something outside of your portfolio if it were in line with your longer-term vision for the portfolio? Or is that just completely off the table because of what's on your plate internally? Thanks.
Patrick. We really do. We've got enough to chew on with our own portfolio, which we've highlighted today. No, we're not in the market in terms of acquiring anything else. At this point, the divestments we're doing, by the way, these are assets that are good assets. What my experience has been that when you've got good assets with productivity, there can always be a buyer, and I liken it to real estate. A good house in a good neighborhood, markets go up, markets go down, but you tend to surface buyers for it. We're already seeing, as we've initiated only the process on CVSA, some pretty strong interest right out of the gate. We'll see. As far as us looking to acquire other assets at this point, no.
Thanks. Sorry, maybe if I could follow up on that. Just in terms of how you evaluate a bid, in terms of value for, let's say, CVSA, would you do on a reserve ounce, resource ounce basis? Would you look at it compared to what the NPV, what you think the NPV is of the mine? How do you evaluate whether a bid is a decent offer or not?
Patrick, we look at a broad spectrum of metrics. There isn't one single criterion, but we also look strategically. For example, an asset like CVSA, great asset, it's been a significant cash flow generator for the company, and it's got life ahead of it. On the other hand, for us, our focus is going to be on areas where we're going to be building critical mass in the future, and that particular jurisdiction doesn't fit into that mix. Great place, operate successfully for a long time. CVSA has good potential in front of it. By the way, when you're looking to divest, you can't squeeze every last drop of juice out of an asset, then expect to find reasonable buyers. Now's the time to be looking at a process around CVSA.
It's a combination of things, but including long-term strategically where we want to be deploying our resources and attention, and that just isn't one of the jurisdictions we intend to do that.
Great. Thank you very much.
You're welcome. Thanks, Patrick. I apologize we've gone over, and I know everybody's got a busy day ahead of them, so we'll have to end the call there. If there are additional questions, by all means, please, we can follow up with the IR team. Next call, we're going to keep tighter to allow more times for questions. We apologize for that. I'd like to end by thanking everyone who joined the call. Again, 2018 was a great year. We're looking forward to 2019 and to updating everyone on our progress with our Q1 call. Thank you very much.
Thank you very much, sir. Ladies and gentlemen, on behalf of AngloGold Ashanti, that concludes this afternoon's conference. Thank you for joining us. You may now disconnect your lines.