Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti Tropicana Virtual Site Visit Conference. All participants will be in listen only mode. There will be an opportunity to ask questions later during this conference. Please note that it is advisable to open the webcast on Chrome. Please note that this call is being recorded.
I would now like to hand the call over to Fuso Mgidi. Please go ahead, ma'am.
Thanks, Irene. Good afternoon, good day, everyone. This is the call, as Irene has said, Tropipana in the virtual call to discuss our operation there. I would like to just I let everyone to the disclaimers on forward looking statements as well as regarding this presentation. Please make sure that you go through these as we go through the presentation.
The presentation will be made available on the webcast as well as will be on our website after this call. Mike, over to you. Thanks.
Thank you, Vandeaver. My name is Mike Erickson. I'm the Senior Vice President of the Australian Operations of AngloGold Ashanti. So what I'd like to do today is give you an overview and an update on some details of the Tropicana operation in Western Australia. Just as a little bit of background, the Australian region contributes approximately 18% of the production within the Anglo Gold Ashanti portfolio.
That comes from 2 operations in Western Australia, Sunrise Dam and Tropicana. They're approximately 200 kilometers apart and both are ranked in the top 15 operations in Australia. In calendar year 2017, they between them contributed some 700,000 ounces of production or 560,000 ounces attributable. The Tropicana, so I'm now on Slide 4, I'm sorry, which is a location map. It's a very remote site, Tropicana, some 330 kilometers Northeast from Kalgoorlie, which is about an 8 hour drive on a gravel road.
We have a bitumen sealed airstrip on-site, which allows jets to fly in 100 seater jets that takes about 1 hour and 15 minutes from to fly from Perth to the site. We also have commute flights to Kalgoorlie for people who live in that town. We have a comfortable village also that accommodates approximately 7.50 people. We have about 250 Anglo Gold Ashanti people that work there and the remaining personnel are contractors. I'm now moving to Slide 5.
So, what I'd like to do now is to give you an update on Trapacana and take you through the key elements of the current operation. And then I'll describe the opportunities that still exist to optimize the mine plan and to match the processing plant to the scale of the mine plan. So, next slide, delivering to promise. So, since commencement of mining in late 2013, Tropicana has produced 2,200,000 ounces of gold. It has always delivered to expectation or exceeded budget, in fact.
What you will see in the production figures quoted there, that the second half is going to be significantly higher than the first half in 2018. Now that's because we're entering the next phase of grade streaming, which is going to continue through next year. So we expect to see Tropicana positioned at around number 4 in Australia in terms of gold producers. The next slide, Slide 7. This is just a slide with some comments on mining.
There's a strong focus on continuous improvement and data analytics in Krapacana. We have a culture well embedded that we call operational excellence. The team has been working very hard with our alliance mining partner, McMahon, to optimize the load and haul and drill and blast activities to minimize costs, while undertaking progressive landform faces and commencing in pit backfill, which is an important part of the future mine strategy. Slide 8 is on the mining optimization. And you'll see on that chart, the axis on the left, the mining costs are in Aussie dollars.
So I just wanted to alert you to that currency there. But as you can see in this chart, the mining volume has essentially leveled out at the mining rate of approximately 95,000,000 tonnes per annum. This is a very manageable rate for the team. It's essentially the rate that we achieved in 2017. And by holding this level stable, the operational excellence work is able to really focus on improving productivities and costs.
So we can see the mining costs down around the $3,000,000, dollars 3.10 mark in Aussie dollars. Now depending on the exchange rate that you use, currently it's about $0.72 but that had about $0.75 That's $2.20 to $2.40 over those latter years. Now most of our costs are in Aussie dollars and we're exposed to cost neutral prices and so forth. I'll talk to that a little bit later. Slide 9 is a chart of the mine to mill reconciliation.
And there's really not a great deal to say about it. It's been pretty stable. The geology is very well understood and this is quite predictable. The gold deportment is very fine grained and its well dispersed in the host rocks, which means it's easy to sample, drill spacing and grade control processes, it's well drilled and that gives us accurate and robust estimation models. So we're in a pretty good position with information out in front of us be able to give good estimates of production over the shorter term planning horizon out to sort of 18 months.
The next slide, which isn't entitled to reliability improvement, to reliability improvement, Slide 10. So this chart looks a bit complex, but it really shows the journey in the processing plant where maintenance and engineering teams have taken the plant to the best run times in the Anglo Gold Ashanti Group actually. Shutdown intervals are now out to 17 weeks. And we've actually had a number of months at 100% runtime with record tonnes treated just last month of 689,000 tonnes. So it really is now operating at world class runtime benchmarks.
The next slide on maintenance, again, that's in Aussie dollars on the left handed legend. But the maintenance unit costs have come down and stabilized at a very acceptable sort of benchmark. The costs are down some 31% from 2015 numbers through a number of improvements. 1 has been increased throughput. There's been an enormous amount of work done on where life.
We find now we've got very good where life for the mill liners. So we don't have to take the mill down and it's now at the 17 weeks, nearly as often as we did. We've put new products and bolt in and out areas and shoots and really being able to optimize and extend that duration between processing plant shutdowns. Slide 12 is that talks to the mill throughput rate. We continue to push the throughput rate.
Quarter 2 averaged 9.31 tonnes per hour and we're now targeting 9 40 tonnes per hour for the remainder of the year. We actually we manage the relationship between grind size and metallurgical recovery to optimize the 2. So we've got some flexibility there and we've got the high pressure grinding roles in the processing plant. We've been able to improve the feed distribution to the rolls. And we're really making good use of that energy in the HPGR.
That's been an excellent piece of equipment in the processing plant that's delivered above expectation. We've got very good well life out of the rolls. And again, it's extremely energy efficient. The next slide is on metallurgical recovery, Slide 13. And I mentioned it just a moment ago.
The metallurgical recovery is well understood, and we use our knowledge of the recovery and grind size, so relationship to optimize gold production and costs. It's sitting at 88% to 89% at the moment this year. It's quite stable. We understand it very well. And the modeling of recovery going forward is very accurate.
The next slide, Slide 14, simply shows the combined processing and maintenance costs to give you a sense of where they're sitting and they're stable at below Aussie dollars 20 a tonne down to factor about $18.50 at the moment, which is a very good position relative to other benchmarks in Australia. And the next slide, Slide 15, talks to the gas pipeline. So this pipeline, it was commissioned in 2015 And certainly in more recent times, we've seen the oil prices climbing, exchange rates fall. And as we've converted the power station essentially to natural gas, this project is delivering significant value. We're well protected from the oil price and exchange rate variability through CPI linked contracts in Australia dollars and we've secured some very good gas contracts, good prices over the next 3 to 5 years.
And it helps very much in our processing costs because power is approximately 45% of our processing plant costs. Okay, Slide 16. In fact, we move to 17. What we'll now go through is the optimization work that's happening in the firstly in the mine. And this slide talks about the I guess, the evolution of the history of the strategy of the open pit mining at Tropicana.
We've talked for some period of time now about the depth extension of the ore body at Tropicana and the mine planning work has continued quite relentlessly over this time as we've got further drill information, but the design work has focused on geotechnical information for what was slope angles for optimization work on costs and so forth. But the most recent round changes in mine sequencing and design optimization has actually resulted in the removal of nearly 100,000,000 tonnes of waste from the development of these open pits. It's most notably in the hanging wall of the ore body, particularly in the Havana pit, which is the large more southern one and in Boston Shaker, which is the higher grade open pits to the north. So the removal of that waste has had minimal impact on the overall ounce production out of the open pits, but it's had a significant benefit to the overall cash flow. The key to the strategy remains backfill and the Tropicana pit, which is the 2nd pit from the north, as you can see in this slide, will be the area that we backfill.
In fact, we've commenced with a little bit of backfill in the north of that pit now. The Tropicana pit will in fact mining will be completed there end of Q1 calendar 2019 next year. So not long to go in Tropicana. So the impact of all that as I said, the removal of almost 100,000,000 tonnes of waste has effectively reduced the mine life by 1 year, but it's extended the stockpile feeding by 1 year relative to our previous presentations. And the optimization work has actually seen a reduction in the overall strip ratio by some 20%.
So it's been very significant work over the past 12 months on the ocean pit. On Slide 18, which is about optionality. It's the important thing is that we've retained the optionality and the flexibility with multiple decision points as we go forward. So we can always respond to any changes in economic conditions. So we will continue to work on designs, continue to look at ways to improve the, what effectively the waste haulage profiles to reduce costs.
Now if I move to Slide 19, future of the mine. This slide basically and again, the legend I draw your attention to Aussie dollars on the left. This slide just gives you a sense of the longer term profile and the benefit of the mine design and scheduling work. So you can see quite a flat profile now at around 95,000,000 tonnes movement per annum. Whereas before, we had, in fact had an increased planned up to about 105,000,000 tonnes per annum.
95 is a very it's a good volume. It's the equipment is on-site. We worked to that mining rate all of last year. We know the fleet well and it's actually very good for the team to be able to hold that steady at that rate. So that's been a there's been enormous benefits that come from that stabilizing that profile at the 95,000,000 tonnes per annum road rate run rate.
Now I'm up to Slide 20. So this is an update on the processing plant. So the history of the plant has been one of debottlenecking and plant optimization to get to where we are now, which is at around 7,600,000 tonnes per annum. In fact, this year we're looking so we might be at 7,700,000, close to 7,800,000 tons as we stand today. The next slide 21 shows where we intend to take the processing plant.
So now that the mining profile has been optimized that we're around the 95,000,000 tonnes per annum of total movement and the ore that flows from that, Matching the process and capability to the mine output presents a significant opportunity. So what we've been studying over the last probably 12 months has been the benefits of an additional ball mill being installed in the processing plant. And it's going to be if that work is currently underway on-site, it's in fact well advanced and the commissioning of this additional mill will be completed by the end of the year. Slide 22. So this additional grinding capacity, it's from a 6 megawatt bore well that's going to be added to the circuit.
It's going to increase our throughput to about 8,200,000 tonnes and increase our metallurgical recovery to 92%. So that's an additional 3% or thereabouts in metallurgical recovery. But as I described earlier, there's quite a strong relationship between grind size and metallurgical recovery. So what we're able to do is to really sort of dial in the that relationship. And if we're putting some lower grade stockpile through, we might decide to put it through at a higher rate.
And that could be at an annualized rate of 8,500,000 tonnes. Now we might decide to do that over a month or 2. Then when we've got higher grade material, we could dial it the other way and in fact maximize metallurgical recovery at a lower throughput rate. So it gives us enormous flexibility to take advantage of that relationship to optimize gold production at the lowest cost. Both these mills, our current mill is a 14 Megawatt mill, very big one.
And now with a 6 Megawatt mill, they're going to run-in parallel. So that gives us increased operational flexibility. We can take one down and the other one can continue. We've got some common spares. There's a sorry, the 14 Megawatt Mill has 2 7 Meg Electric Motors, so they're large motors.
The 6 Megawatt Mill has the same will have the same motor. So there's a benefit in critical spares. This project was a cost in the order of $28,000,000 and there's a payback about 1 year. And it's well and truly on the target for commissioning in the December quarter. And we're anticipating fully operational from January 1 next year.
Next slide is Slide 23. So with this additional throughput, we need additional water. Kamikaze ball field. It is one of the 2 ball fields that we have for Kamikaze ball field actually is a it's better quality water and it's much closer to the processing plant. However, originally we didn't have we didn't think that the aquifer could provide the volumes of water that we would need.
So we've since done a lot of exploration on this aquifer and there is a hope that long term we could actually transfer to 100% water sourced from this bore fields. It's got much better, lower salinity and therefore much lower cost in additional reagents and so forth. So that's been a real positive for us over the last 12 months. And this bore field was still being explored. We're equipping it now to provide that additional water that we need for the higher throughput.
Okay. Now I'll move on to Slide 24, which is Boston Shaker Underground and we'll go straight to 25. So this is a view of the Boston shaker pits and the ore zones that extend beneath the open pits, they were if you report from the slide of the open pits, they were the northern most open pits on that graphic earlier on. There's been quite a bit of drilling carried out over the past year, 12 months or thereabouts, some 40 odd 1,000 meters of drilling. And we've completed a number of programs down to 50 by 25 meters spacing.
This slide shows some of the results. There's certainly some very good intercepts, as you can see with grades in the plus 6, which is higher than many of the ore zones at Tropicana. We're also pleased that this ore zone is a little more steeply dipping too. So it's a there's 2 good looking zones extending beneath the Boston Shaker pit. There's a pre feasibility currently underway in fact due for completion in the December quarter.
If that is positive, which I believe it will be, we'll more than likely declare reserve at the year end reporting period. On Slide 26, there's a graphic of an underground mine layout. That's a fairly straightforward design. What you will see on that slide is a decline that extends across from the Tropicana pit. So that's extending from the northern extent of the Tropicana pit.
And what we would have then is unimpeded access from the Prapacana pit to the ore zones beneath Boston Shaker. So we don't have to have the interactions between underground fleet whilst we're still mining the Boston Shaker open pits. As I'd also said earlier on, the Tropicana pit is destined to be backfilled and it will be fully backfilled right to the top. So a period about 3 or 4 years and the study is yet to determine this. We would then convert over to a decline from the base of the Boston shaker pits when those pits have finished mining.
Now in the feasibility studies indicating that a start by mid-twenty 19 is very achievable. It would be essentially a small contract with a single jumbo and in a truck and a bogger and they would commence midyear and in about 9 months put us into a position where we could be drilling out from underground positions these ore zones in detail to get stoping so that we can provide underground ore in 2020 beyond. Slide 27. I think the point to note here is that Boston Shaker was not the only underground potential. In the past, we have completed pre feasibility and the drilling to indicate a level of confidence for down at Havana Deeps.
At the time, we used that information as a trade off study between deep in the open pit and underground. I think now once we've got an underground presence at Boston Shaker and we've got an establishment, an underground crew, This potential underground beneath Havana becomes more interesting. There's a high grade zone also beneath Havana South and there's a couple of indications beneath Tropicana. So quite possibly we've got a number of ore zones beneath the open pits at Tropicana. The important thing will be to get started in the underground to bring this all in whilst the open pit is still providing the large volume because we'll have a processing plant capable of treating in excess of 8,000,000 tonnes per annum.
The underground would never support that based on what we know now. Looking at Slide 28 just introduces a couple of comments on exploration. The strategy the exploration strategy has been very much focused around the open pit and a lot of our work has been in building a resource for the underground during the last 12 months. We still continue to do work in the region within haulage distance of the processing plant. I think the I think, look, it's fair to say that we haven't had a major discovery of the scale of Tropicana.
We've had success in some smaller potentially open pitiable satellite deposits that would feed in such as Madras and New Zebra. We continue to do the grainfields work. And I think it's reasonable to say that it's quite mature, but it's certainly not over yet. We'll assess the satellites where there might be an opportunity to connect them up. A single haul road would be very important.
And when would we need to feed them, very much dependent on grade through the processing plan. So exploration work continues. The last slide, I might not talk to, but it's really yes, I will. It just talks to some of the operational excellence initiatives and the way we
plan this work. You can't read any of
group. You can't read any of those. They're actually spreadsheet project plans on the right hand side. But if I talk just briefly on the discipline and the way in which we do these projects, it's in fact, this week, and I'm heading up there tomorrow to Tropicana, we've got another workshop for the week on operational excellence initiatives. So we draw in colleagues from different parts of the business, expertise in meclercy, mining, people from other operations who've got different ideas and haven't been all that exposed to Tropicana.
And we do a lot of sort of think tanking on where might opportunities lie. We then rank and prioritize projects and people are assigned to these projects to manage them, to do the analytics on them, and we then track them and measure the benefit and so forth. So it's a sort of a continuous improvement rigor that we have in place and we will do this probably twice a year, those big events and then track the projects over the coming months. Well, that was the last slide. I hope I haven't gone too long or in fact too fast, but very happy to take any questions.
Thank you. Our first question is from Adrian Hammond of Standard Bank.
Mike, hi. Thanks for your time. Just want to sort of wrap my head around what the outlook for Tropicana is looking like now in terms of production. So at the moment, you're generating around 330,000 ounces attributable. So where do you see that going for yourselves with the increase in throughput over the next sort of 2 to 3 years?
Hi, Irene. As indicated, we intend to continue grade streaming through all of next year. So our production next calendar year will be a smidge higher than Michi. And then you will see in 2020 the effect of that grade streaming come off, which is why we want to bring the underground production in particularly in 2020, which is why in fact we want to start it next year. So you're going to see numbers of around and I'm just talking at 100%, I'm sorry, 100% numbers.
But so I would see it going over 500 next year and well into the mid 400s for the next 3 years after that.
And does that include Boston Shaker in those numbers?
Yes, it does.
And Yes, Boston Shaker,
of course, is at a modest level of understanding. As you would imagine, we're assuming grades of sort of 3.5 to 4. And we're assuming rates of maximum 1,200,000 tonnes, not in 2020.
Okay. And what does this do for your sort of mine plan for the medium term? Is that sort of does Boston Shaker keep it steady for some years or when does it start to taper off?
Boston Shaker, I think we're seeing about a 7 or 8 year mine life, more modest in 2020, sort of 400,000 tonnes as we build up and and that 8th year at about 600,000 tonnes. Now these are very rubbery numbers because it's just early PFS work. But that's the sort of profile that we're looking at, Adrian.
And what do you think
the reserve there, you say you're going to declare reserve there this year. What do you think that's going to be look like in terms of its size?
I think it's look, it's very much about the drill density that we will have completed by the end of the year and therefore what we can classify as integrated and get into a probable reserve, I would be guessing something like 500,000 ish.
Thanks. And you've obviously factored some capital to develop that underground. What sort of numbers are we looking at here for the development?
The developments of cloud, I'm trying to think it's about $20,000,000 now a lot depends on how you want to go sit up. You get the underground mining contractor to establish things like change rooms, offices and things like that. I would rather we did that. Piece would be in the piece would be in the underground development, the ORD as we call it to get the decline down there at a event shaft, which is the sort of main target in the 1st 12 months to get to a position to raise for a bench shaft through up into one of the benches in the fresh rock in the Boston shaker pit. So that's really the initial year.
Are
you able to tell us what sort of IRRs this project as a standalone achieves?
No, only because I don't have it to hand to be honest. We're still right in the grip of the work. And the only reason I've got some numbers is because we're starting to work on our budget now. And I just wanted to get a sense of it from the guys. We've actually got a steering committee that when we review this next week to be honest.
So I don't know the project parameters yet.
Mike, thanks very much. Appreciate it.
Thanks, Adrian.
Our next question is from David Houghton, OCIBC.
Good morning, Mike. Thank you very much for the update. So just looking at that underground, just if I recap where we're at, got initial CapEx of around about $20,000,000 Is that Aussie or U. S. On
the No, Aussie. David.
Okay. And your ultimate throughput, you'd be 1,000,000 to 1,200,000 tonnes per annum for 7 to 8 year life starting 2020 modestly ramping up. Now the kind of grade that we're looking at there, previously, we've seen grade at around about the 3.5, 3.6 kind of level grams. Is that something that we should be thinking about as realistic coming out of the pit out of
the underground? Yes. And look, in the initial schedule that I've actually got in front of me, it is exactly that, 3.5 to 4.
Okay. And what about the unit costs for underground mining? Have you got a bit of an idea of that at this stage?
Where we are at the at a costing point of view is that we of course, we've got a very good handle on mining costs via a contractor because of our experience at Sunrise Dam. So at PFS level, which is supposed to be plus or minus 15% or thereabouts, We're actually dialing in numbers that we know extremely well, but making allowances for on the conservative side. So I think our unit costs that we're putting in will be a bit higher than Sunrise dams.
So $45 to $50 aussie
a tonne sort of thing?
Yes, dollars 55. $55? There's no contemplation of in a paste fill. There's no we're going to keep this pretty simple with the long hole open stoping, transverse and longitudinal stopes with reasonable width. What we, of course, don't know in detail is penetration rates and things like that.
So, we've heard on the conservative side. We've heard on the conservative side of ground support regime, but we've got very good pricing information. We just need to get actual information.
And would you propose backfill into these stopes and would pace backfill be part of the solution there?
No, I don't think so. I don't think so. I don't think we could I think that would add too much cost. Look, we'll look at backfill, but I don't think there'll be big enough to require it. If we need, if we've got some areas where we could contemplate cemented backfill with waste, but we'll play that by year.
At this point in time, there's no contemplation of capital for a post deal plant.
And just looking at Figure 26, which is your schematic where you've got Tropicana then going to Boston Shaker. And looking at the decline coming off the base of the Tropicana pit for access to the underground, I'm just wondering why it's coming off the Tropicana pit rather than dropping down as a decline from the Boston shaker pit?
Well, the primary reason is that, that access position is available in the matter of 2 or 3 months. Because the pit is depleting. Beg your pardon?
As the pit is depleted.
Yes. So the Tropicana pit and the northern end will be mined out. So there's an opportunity to establish a portal there and get cracking sooner rather than later. If we were to establish our portal in the Boston Shaker pit, Boston Shaker is not a very big pit. What we would then have is all sorts of interaction issues.
As we mine Boston Shaker, we've got the open pit fleet as well as underground. And that is a recipe for inefficiency in both the open pit and underground. So our preference is to start in Tropicana and come across. And once the Boston Shaker pits are finished, we'll just connect through to the base of Boston Shaker and that will allow us to fill the Tropicana pit beyond that portal. So it's really for timing to give us as earlier start as we can.
And it's also to minimize the inefficiency that will come with interaction of the fleets.
And I guess the GEO team would be quite interested to do some drilling of that to see what's sitting sitting below the Tropicana pit between Tropicana and Boston Shaker?
Look, that's quite right. There is in fact some high grade hits for isolated ones deeper at Tropicana that are really quite interesting. There's pretty sort of expensive and slow drilling from surface. So we do want to get underground and start to getting some drill positions. And you're right, on that, across that decline, there are allowances for drill positions to be able to drill back underneath Tropicana and also set ourselves up to drill with short holes.
In fact, we're confident we're not contemplating, we're going to use RC drilling, which has been extremely successful at Sunrise for the shorter length holes at across the Boston Shaker. We're sort of optimizing the drill horizons above the ore side to be able to really knock that out with RC drilling.
I've just got a few more questions, if that's okay. Just the expansion of the Is that still accurate? And would that be just spent in Is that still accurate and would that be just spent in Q3 and Q4 of this year?
It was US28 million dollars And it's the spend I'm really want to finish in 2018, but what we'll probably have is some spend for critical spares that will arrive in Q1 2019. But the bulk of the work, which is all the people and the labor and all the activities will be finished in Q4. So high spend in Q3 and Q4. So but you're right. I mean that there will be some spend that will flop in the next year.
I think it's a good year and some other like the extra mill measures or something.
Okay. And then number for the open pit?
There's really not much. What I didn't mention was a small expansion to the village as well in the sort of list of capital. But from an open pit point of view, there is very little fleet. Of course, we'll be right at it through, but that's paid for by McMahon. And so there's no lumps that we see of capital coming in the future.
All right. And then last one, just looking at the strip ratio. For the first half of this year, we're sitting around about 9.5:one. You had mentioned that you've got the fleet there to maintain a high level of material movement. What should we be thinking about the strip for the next couple of years in the open pit?
I'll keep it at that long term average that you just mentioned. Yes. Okay. It was looking worse. So the work that the mine planners have done on that minimizing of the waste and so forth has been able to enable us to keep it at that level.
It's been very good. All right.
Just quickly, have you got a sustaining CapEx number for Boston Shaker at hand?
Well, the underground.
Okay. Fantastic. And going back, I guess, recapping on the numbers that we've heard before. So, again, initial CapEx of 20,000,000 Aussie at a rate of 1,000,000 to 1,200,000 tonnes at a grade of 3.5 to 4 ish for 7 to 8 years, you have a slow ramp up from 20 or with ore coming from 2020 and unit costs of around about $55 a tonne, and you're looking at sort of open hole sorry, long hole open stoping?
That's correct.
Fantastic. And PFS is looking like still looking like it's going to come out at the end of the calendar year?
Yes, it will. I'm quite confident that that will be completed in quarter 4. Fantastic. Thanks, Ernie.
We have no further questions on the line, sir. Would you like to make any closing comments?
No, I don't think so. I'd just like to thank everyone for joining the call.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.