Good afternoon, ladies and gentlemen, and welcome to AngloGold Ashanti's H1 2018 Results Conference Call. All participants will be in a 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 to hand the conference over to you, Mr. Stewart Bailey. Please go ahead, sir.
Thank you, Judith, everyone welcome to our presentation today of our first half results. We have a pretty packed schedule today, running through the overview, the financials, and the operating performance. I would ask you all to please have a look at the safe harbor statement at the beginning of this presentation. It has important information concerning the presentation and forward-looking statements. Without further ado, I'm going to hand over to Venkat.
Thank you, Stewart. Good morning to you all. If I can start off with the slide on strategy, slide number four. As always, if we can reiterate how we are guided by our strategy, which has enabled us to be deliberate in terms of how we allocate capital in a way that we believe will create value over the long term. Once again, it is this focus and commitment that has helped us again deliver a strong set of results across every metric today. We remain committed to delivering a safe and actively managed portfolio with tightly managed costs and capital, which helps ensure that the balance sheet stays robust enough to handle this volatile gold market. We have also never wavered in our commitment to invest in the long-term sustainability of our business, regardless of market conditions.
These pillars support our central objective of improving cash flow and returns on a sustainable basis. As we will highlight in this presentation, we are well underway in the disciplined work to achieve these outcomes in the business. I'd like to start with our safety performance, which was unfortunately marred by one fatality during the start of the second quarter at Mponeng, which takes the number of fatal accidents for the year to three. These workplace deaths remain far and away the most difficult aspect of the job, and I'd like to use the opportunity to send the heartfelt condolences of the entire AngloGold Ashanti team to the loved ones of the deceased. As we continue on the journey to eliminate all injuries from our mines, we believe that we must deliver reliably safe production to ensuring ongoing sustainability of our business.
We are making important progress in this regard with an all-injury frequency rate that improved by almost a third, putting it at its lowest point in the company's history. We continue to focus intently on driving that still lower, with particular emphasis on continued improvement of our organizational safety culture at every level, an area we believe especially important to properly analyze and understand the root causes of accidents and the near misses, namely high-potential incidents. Turning now to slide six, let's look at some of the highlights of the first half of the year. Production from our retained operations was strong at around 1.6 million ounces, up 4% year-on-year. Australia was a major contributor to this performance with a 20% increase in production over the period and Kibali increasing production by almost a third.
All-in sustaining costs improved 5% year-on-year with the help of our planned reduction in sustaining capital following the heavy investment last year, helping to offset creeping inflation along with the Operational Excellence Program, which is starting to bear fruit. Ludwig will talk to that in some detail in a few moments on this important internal catalyst. What this all means is that we see our production for the full year at the top end of the guided range and both all-in sustaining and total cash costs trending towards the lower end of the guided range. You'll remember our announcement at the end of February that we completed the sale of our Vaal River underground assets, markedly reducing our footprint in South Africa and giving us extra liquidity to putting it down towards paying down our South African debt.
A quick look at free cash flow will show a strong improvement over the first half of last year, with good positive free cash flow in the second quarter. The strong cash flows and the year-on-year drop in net debt by 17% means that we have lowered leverage of net debt to EBITDA of just over one times, which means a robust and flexible balance sheet going forward. Just before I hand over to Ludwig, it's worth taking a helicopter view of the portfolio, which is now showing a very good balance with continental Africa now speaking for 44% of our production, with strong efficiency gains set to come through as Kibali ramps up this year and Siguiri ramps up in 2019. Let's not forget that this improves further when Obuasi comes online.
The Americas now contribute 24% of production, benefiting from significantly weaker currencies and some good work on Operational Excellence, particularly in Brazil, which will soon pay dividends. Australia is about a fifth of our production and is on a clear improving margin trajectory. This leaves South Africa at a little over a 10th of our production with restructuring underway as we strive to return it back to being a cash-generative region. With that, I'll hand you over to Ludwig.
Thank you, Venkat. We are at slide nine. It's very pleasing to see the international operations deliver another strong performance now that the higher inward investment last year has begun to bear fruit. We had solid contributions from Iduapriem, Kibali, and our two mines in Australia. Production was up 5% year-on-year to 1.37 million ounces at a total cash cost of $769 per ounce. All-in sustaining costs were also down 4% at $948 per ounce, reflecting not only the lower capital, but also the intensified efforts of our Operational Excellence initiatives. This performance was achieved despite inflationary pressures dominated by higher fuel prices, adverse inventory movements, and the underground transition at Geita, which led to higher cash costs when compared to the same period last year.
We expect further increases in production in the second half, especially during the last quarter, and a continuing decline in trend in the unit cost given the visibility we have on the success of the Operational Excellence program. Turning to slide 10. Turning to Continental Africa, we had another strong contribution from Iduapriem, delivering an 18% increase in production year-on-year, driven by better grades and higher tons treated. The performance also reflected the benefits of the conversion to CIL tanks to improve the recoveries. Another stellar performer in the region was from Kibali, which delivered an impressive 32% increase in production year-on-year. This has been driven by the ongoing ramp-up of the underground mining of the successful commissioning of the automated underground ore handling system and its integration with the vertical shaft.
At Siguiri, production was down as planned due to lower grades, while Geita was negatively affected by a 60% drop in recovered grade, a point reflected in May, and we see those improving over the balance of the year. As we've mentioned before, higher cost at Geita were due to both an anticipated drop in grades from the open pit and a high initial cost from the underground mining as that continues to ramp up. This has been exacerbated by more costs being expensed as opposed to capitalized, along with cost pressures from high fees and royalties. We still expect performance to improve over the course of the year as the underground operations are ramping up. Slide 11. In Australia, Sunrise Dam recorded another strong result, particularly in the first quarter, with production increase sitting 43% over the previous year.
The solid performance was assisted by the successful implementation of the new mining strategy, which together with the new commissioned recovery enhancement project and higher underground grades and volumes, will help to continue this outperformance. Tropicana is also starting to reflect improved efficiencies and throughput rates. Production was up 3% year-on-year, although costs were also higher due to the greater proportion of waste mining. The focus during the first half was the installation of the second 6-megawatt ball mill, which is on track for completion by the end of this year. Looking forward to the rest of the year, we are seeing further improvements across boards. Slide 12. Now moving to the Americas region. Cerro Vanguardia in Argentina delivered a solid production, giving strong performance from its crushing, milling, and leaching areas.
In Brazil, production was lower at Minaúçu due to the challenges in accessing higher grades and lower tonnages at the Cuiabá mine. Córrego do Sítio saw lower grades. The 10-day nationwide trucker strike also had an impact on our performance, which we'll be looking to claw back in the second half. We saw very good unit cost improvements year-on-year, given the traction from our Operational Excellence initiatives in the region. This improvement is expected to continue as we will see the benefits of both a new shift system and also the headcount restructuring undertaken in the first half. Currency weaknesses remain a factor in both Brazil and Argentina that benefit us for now. As you can see, the last five years have been a bit of a journey.
From 2013 to 2015, we were really restructuring the way we do business, stripping out waste and duplication and engineering our CapEx numbers lower without sacrificing optionality. 2016 and 2017 were reinvestment years, as we made positive improvements at our key international assets that we believe would yield systemic long-term improvements. This year, we're starting to reap the benefits of that long-term approach, with the investment starting to yield results and our Operational Excellence program starting to kick in. We turn to slide 14. Let's look at what we got for this reinvestment program. I'm not going to go in all the details, but you can see from the slide that there are value-improving initiatives that have either been delivered or are underway across the portfolio.
Sunrise Dam has been a champion asset from this perspective, where we see both brownfields opportunities and value-enhancing initiatives that are in the process of being realized. Kibali is also starting to kick. Iduapriem is motoring along nicely, and into next year, you'll see the combination plant project at Siguiri giving us a production and a margin benefit. Brazil will be the next key area of focus for us, where we are busy with ore reserve development, optimization of underground mining sequence, and productivity improvements. In Argentina, we continue to explore the possibilities around extending the mine life while reducing costs. Turning to slide 15.
In addition to the inward investment taking shape, Operational Excellence work continues with more than 338 individual enhancement projects tracked through a project management system as we strive to not only reimagine what is possible from our portfolio, but to start seeing meaningful move down the cost curve. This has been a necessary step change, driven by actively working to prioritize sustainable cash flow improvement at every level of the business. We are drastically improving mine planning and forecasting, and you can see those results from the improving consistency in our reported performance. An important ingredient is our approach to data analysis and benchmarking against similar better performing assets across the global sector. This is a key tool used to discover opportunities and identify best practices.
The benefit of this work is what you're starting to see, though it's only at the very beginning, which is a redefinition of our asset potential, further entrenchment of our already strict capital discipline. Slide 16. The benefits we expect to achieve for 2018 above and beyond the proof plans for the year are set out in the last column of this slide. As you can see, we have made considerable progress on our OE 18 efforts, not by trying to fund a silver bullet approach, but in reaping the aggregated benefit of a number of initiatives which together elevate the overall asset performance. We have already banked part of the benefit of these figures you see on the right and have high confidence that we will at least achieve those over the balance of the year. With that, I'll hand over to Chris for the South African business.
Thank you, Ludwig. If we can turn to slide 18. In South Africa, we started the second quarter with a smaller and more focused footprint. Mponeng continues strongly with production increasing 12% year-on-year to 119,000 ounces as the mine improved mining practices together with higher reef values. This is our flagship mine in South Africa, which we are working on developing to reach its long-term potential through the mine life extension project. The project has unfortunately experienced some delays over the quarter due to the fatal accident, as alluded to by Venkat early on, which occurred in April. This fatal accident caused a delay in the ore reserve development and also had an impact on the construction activity to a lesser extent. We are, however, hard at work to ensure progress in this project.
On the technology innovation project, this has been scaled down in line with the accelerated closure of the TauTona mine. Work continues to establish the site for the high-strength backfill plant at Mponeng mine, and it is estimated the plant construction will now commence in the second half of the year. At surface operations, Mine Waste Solutions saw a pleasing 4% improvement in plant recoveries, assisting production as the operations reverted to normal production levels compared to the first half of 2017, which was impacted by significant weather storms. Costs in the region were impacted by power, annual salary increases, and the stronger ZAR against the USD. The work to further reorganize this region in our portfolio continues as we optimize our cost base to fit the smaller operating footprint, and we are encouraged by our stronger year-on-year performance from our retained assets.
In quarter three, we aim to conclude the current Section 189 process and hopefully finalizing our wage negotiations and returning South Africa to its positive cash flow in quarter four. Turning to slide 19. Work is underway to ensure that cost structures are resized appropriately for the now smaller footprint. Our focus is to responsibly create a South African business that can be profitable on a sustainable basis. We plan to do this by simplifying the operating model, reducing the surface footprint by pursuing commercial opportunities, along with the rehabilitation of unused infrastructure, and then finally completing the dialogue that's currently ongoing under the Section 189 process. I'll now hand over to Graham.
Thank you, Chris. Today I'll cover our key projects and make a few comments on exploration. As Ludwig's already outlined, Kibali delivered an excellent result for the quarter and for the first half. The underground ramp-up and continued improvements in throughput and recovery helped boost production to a record 202,000 ounces on 100% basis, a 17% increase from the first quarter. Cash costs decreased by almost a third to $645 an ounce. For the first half, production was 374,000 ounces, a 32% year-on-year increase at cash costs of $699 an ounce, and all-in sustaining costs of $876. The final element of the original project is the third hydropower station at Azambi. Commissioning has commenced, and the power station will be fully operational in the third quarter. Total hydropower capacity is now 40 MW and can provide most of the mine's power requirements. Turning to slide 22.
In regard to Obuasi, a Ghana parliamentary ratification of the development and tax concession agreements was achieved on the 21st of June. The EPA subsequently issued the environmental permits on acceptable conditions. We had also previously agreed a reclamation security agreement, which defines the scope and the costs for the rehabilitation of this 120-year-old mine. This has also ensured that there is no change to our reclamation liability and the related bonding requirements. With all these approvals fully in place, we are now ramping up the implementation. The project continues to target first gold by the end of 2019 and ramp up to commercial production at the end of 2020. Most of the key construction management roles have been recruited. Detailed design is progressing. Process flow diagrams and design criteria are being finalized.
Preparation of the first contracts for demolition and for housing refurbishment for the construction workforce is well advanced. Establishment of the operating management team is also well advanced. True to our values of maximizing opportunities for Ghanaians and recognizing the country's long mining history, we are providing every opportunity to our current care and maintenance team and other Ghanaians in country and globally to be part of the redevelopment. I've explained before that the objective is to establish a modern mechanized mine. Getting the right culture and systems and processes in place is key to this objective, and we won't be compromised in our resolve to that effect. We are making good progress on this, leveraging from Sunrise Dam and from the Tropicana operations. We are well advanced on the underground mining contract.
Following a thorough process, a 70/30 joint venture between African Underground Mining Services and Rocksure International, a Ghanaian mining contractor, is the preferred contractor for delivery of the underground mining services. Negotiation of the final contract terms and conditions are well advanced with an expectation that project works will commence later in 2018. The joint venture has been incorporated in Ghana and will trade under the name of Underground Mining Alliance Limited. We are very pleased that through this JV, the project is achieving real and meaningful Ghanaian participation. AngloGold Ashanti is to purchase the mining equipment. Orders have been placed, and equipment has already started to arrive in Ghana. Turning to slide 23. The Siguiri Hard Rock project is a high return brownfields project that extends Siguiri's mine life by six years with annual gold production of approximately 300,000 ounces per annum and with further upside potential.
The project remains on schedule. The milestone of completing the CIL circuit has been achieved. The grinding circuit commissioning and new power plant are on track for quarter four this year. Turning to exploration. Of our annual exploration budget of $130 million, approximately 20% is focused on greenfields. Greenfields exploration is focused in Australia around Sunrise Dam and in North Queensland, in the U.S. in the northeastern part of Minnesota and Nevada, and in Argentina. Generative and target generation work is currently in progress in Brazil and West Africa. Strategically, we also use a portfolio of small holdings and earning deals to supplement our in-house capacity. Examples are the farming agreement with Saracen at Butcher's Well near Sunrise Dam, the Silicon prospect in Nevada with Renaissance Gold, our 18% shareholding in Corvus Gold, and our 16% stake in Pure Gold.
The balance is invested in mineral resource and ore reserve replacement at our mines and projects. There is a strong focus on the sites with shorter mine lives based on ore reserves. Turning to slide 25. A good example of this is Sunrise Dam, where the ore reserve life is five years, but the expected mine life is much longer. This slide shows a cross-section of Sunrise Dam. Sunrise Dam remains open in all directions to the south, the north, and at depth. The scope for a long-life mine is clearly evident. The Vogue domain is the largest ore body, and drilling is showing multiple shears which control the mineralization. The Midway Shear Steeps is a new high-grade discovery with widths of three to 22 meters at grades ranging from 20 to 230 grams a ton.
Future production areas include the Carey Shear below the Vogue ore body and the Cosmo area to the east. On slide 26, the team have put in place a clear program to explore and progressively expand the mineral resource and bring these into ore reserves. The application of underground RC drilling, relatively new technology underground, has provided a fast, effective, and low-cost alternative to diamond drilling. Converting the mineral resource to an ore reserve is expensive and in itself does not add value. The diagram illustrates AGA's strategy. Exploration is programmed in advance of ore reserve definition, which is in advance of grade control, leading to production. We aim to keep a balance. In this context, one should not judge the mine life of Sunrise Dam by the ore reserve, but by the resources and the endowment potential.
On slide 27, AngloGold's ore reserve additions by our international assets have outperformed the other five largest gold producers in the percentage of sites with the same or larger ore reserve at the year-end 2017 as compared to 2014. On slide 28, you've seen this slide before, but it bears repeating that mine lives generally extend beyond the published ore reserves. During a mine's operation, a combination of brownfields exploration, resource conversion, Operational Excellence, mine optimization, and price can extend a life considerably compared to that based on the ore reserve at a particular time. This is even more the case for underground operations. The chart demonstrates that at several of our operations, the expected mine life is double or more than that, based on the published ore reserves. Ludwig has run through the brownfields projects in some detail, I won't repeat them.
Suffice to say, they have created the platforms at those assets to realize the extended mine life profiles. Thanks very much. I'll pass on to Christine.
Thank you, Graham. Good day, everyone. As we've heard from Venkat, we've had a strong first half underpinned by a solid operational performance and good cost control. Our balance sheet has strengthened on the back of improved free cash flows, the South African sale proceeds, and a continued focus on capital discipline. We're on a positive trajectory for the rest of the year. I'll conclude on the outlook a bit later. I'll now move on to the detail of our first half performance. Moving on to slide 30. Our half-year financial performance is very pleasing, which benefited from improved operational performance and efficiency, good cost control, and a 6% higher gold price year-on-year. Total production declined by 7% compared to last year.
On a like-for-like basis, after stripping out the sale of Moab and Kopanang, as well as adjusting for the closure of TauTona, we show a healthy uptick in performance from retained operations of 4%. Both our all-in sustaining costs and all-in cost metrics improved on last year, despite 3% higher cash costs. I will unpack the cost detail in a little while. Adjusted EBITDA of $722 million for retained operations, which excludes impairments, retrenchment costs, and other defined items, was 22% up on last year. The increase in the tax charge compared to the prior year reflects the overall improved profitability of the business. Free cash flow improved significantly compared to last year, with $19 million free cash flow generated for Q2. Excluding the once-off restructuring costs for the South African region and the working capital lock-up, we are at free cash flow positive for the first half.
The improvement in free cash flow was underpinned by the improved operational cash flows, lower capital expenditure, and positive working capital movement. As Ludwig mentioned, sustaining capital, particularly in the international operations last year, reflected the peak of our inward investment program, which is starting to deliver benefits. As planned and aligned with our past trends, we expect capital expenditure to trend upwards in the second half. We've already banked some capital savings relating to the earlier conclusion of the South African asset sale, the Operations Excellence Initiative, and favorable currency effects. Working capital movements positively impacted free cash flow due to lower inventory levels and lower prepayments on long-lead capital items, despite the $29 million increased VAT lock-up in Tanzania and the DRC. We have been able to offset some of the historical VAT in these regions. Our efforts in this regard continue.
Finally, an additional retrenchment provision was made for the South African region during the period of $22 million post-tax that will impact cash flows in the second half. Moving on to slide 31. Our consistent focus on improving margins has resulted in a solid all-in sustaining cost margin through the cycle. The all-in sustaining cost margin from retained operations is a healthy 23% for the first half and reflects the benefits of good cost management and our Operational Excellence Program, which focuses particularly on the controllable factors of our business. We've already captured significant cash flow savings relative to budgets through this initiative in the first half, with more sustainable savings expected in the second half. Moving on to slide 32. The 3% increase in total cash costs for the first half reflects the inflationary pressures across the emerging economies that we operate in.
We also saw higher mining costs relating to the Geita underground development, the higher royalty and clearance fees at Geita, and the negative impact of the overall stronger currency effects in the first half. There was, however, a $16 per ounce improvement in total cash costs in Q2 versus Q1, reflecting the improved operational performance. This is expected to improve in the second half with the Kibali underground ramping up, Sunrise Dam Recovery Enhancement project improving productivity, the Brazil recovery in the second half, and the South African region completing its restructuring. The total all-in sustaining costs at $1,020 an ounce and $1,005 an ounce all-in sustaining cost for retained operations reflects an encouraging lower trend compared to last year. This was primarily driven by lower sustaining capital, where some Operational Excellence savings have been banked.
All-in sustaining costs at $1,269 an ounce for the South African retained operations was 9% higher due to inflationary pressures, despite a 7% stronger exchange rate, given that there are fewer units of production absorbing the overhead. All-in sustaining costs for the international operations at $948 an ounce was 4% lower, which was underpinned by a strong operational performance and lower sustaining capital, which more than compensated for the inflationary pressures. Moving on to the balance sheet on slide 33. Our net debt of $1.8 billion at the half year fell by 17% from last year due to sale proceeds received on the South African assets and improved free cash flow.
The net debt to EBITDA ratio at 1.1 times is the lowest since 2012 and reflects ample headroom to our 3.5 times covenant, providing the flexibility required in the current volatile economic climate, whilst positioning the company to remain self-sufficient with regards to its low capital, high return reinvestment opportunities and to sustain our annual cash dividend. Going forward, we expect our positive cash flow momentum to continue benefiting from efficiency improvements as well as from our leverage to gold price and currencies. We have ample undrawn facilities and long-dated bond maturities. We plan to commence the refinancing of our US dollar and AUD RCF facilities in the second half of the year. The refinancing of the South African RCF facilities were completed last year. Our credit ratings remain intact. Finally, concluding on the full year guidance on slide 34.
Our guidance contains the usual caveats relating to any labor, power, or other disruptions. We are on track to meet the full year guidance, where we expect production at the top end of the guidance range, taking into account the improved production performance at the first half and the expected uptick in production at Kibali, Geita, Australia, and Brazil in the remaining two quarters with a heavier weighting expected in Q4 for the latter three operations. The improved operational performance was boosted by the Operational Excellence focus that is expected to further benefit costs, which are trending towards the lower end of the guidance range. Our currency exposure across our various operating geographies continues to provide a natural hedge to inflationary effects and to the volatility in the gold price.
This diversification differentiates us from the majority of our peer group and gives us the resilience in what remains a volatile market as we continue to realize currency benefits in more than two-thirds of our portfolio. We remain sensitive to changes in both the commodity prices and currency, and the estimated impacts based on the assumptions provided on All-in sustaining costs and cash flows are provided with a health warning. Capital expenditure is expected to increase in the second half, although as I mentioned, some capital savings were banked in the first half, and we reaffirm our capital guidance provided at the range of $800 million-$920 million. Sustaining capital comprises 70% of the total capital expenditure. The expected increase in the sustaining capital in the second half relates primarily to South Africa, continental Africa, in particular at Geita, and the Americas.
Of the $200 million-$250 million in project capital, Obuasi comprises $102 million, which will largely be spent in the second half as the project gains momentum. We also have the Siguiri combination plant in at $78 million, and that project, as Graham mentioned, is expected to be completed by the end of the year. The balance is made up of $11 million at Kibali and the completion of Mponeng phase one in at $9 million. I will now hand over to Venkat to conclude.
Thank you, Christine. As you all know well, we have named Kelvin Dushnisky as my successor, and he'll be taking up his role at the start of next month as the head of an experienced and well-established executive team. Kelvin is a great fit for us with a very good working knowledge of the market, of our strategy, and the work we have done on margin and efficiency improvement and strict capital allocation. I expect the transition to be seamless, and I wish him only the very best in his new role. Turning on to the penultimate slide, no prizes for guessing what the focus areas for the balance of the year are and where our work is clearly cut out for us. First, a firm focus on safety tops the list as always.
Secondly, supporting Ludwig and his team in embedding the Operational Excellence plan is something Kelvin has also indicated will be his priority. Third is ensuring that we don't miss a beat on executing the Obuasi redevelopment project. Chris is in the middle of a clear plan to restore the remaining South African asset base to profitability, which is critically important for its long-term sustainability. We continue to engage with our host governments in Tanzania to get greater clarity over the legislative changes there in the context of our mine development and stability agreements, given the uncertainty that exists in the market over the resource sector there. I am hopeful that those discussions will be productive.
Likewise, working alongside our joint venture partner in the DRC to arrive at mutually acceptable terms with the government, given the stability previously granted and the benefits conferred to mining companies that operate in landlocked, infrastructurally challenged provinces such as ours. Finally, as Graham has laid out, we have an exciting slate of brownfields projects which we'll need to deliver to plan, and there is no margin for error. Turning on to the final slide 38. As you know, this is my final presentation after around 72 quarters with this company, the last 22 as its CEO. If you'd indulge me, I thought I'd reflect on some of the work we have done over that time to reposition this company to not only survive the gold price storm that came at us back in 2013, but to also thrive in a range of market conditions.
You see our dogged focus on margins and on coaxing the best out of our assets through targeted investment and Eperational Excellence. As you have heard a number of times here today, this has helped bring down costs by more than a third. In doing that, we have kept all of our options largely intact, which means we are not staring at a production cliff anytime soon. The business is safer. Building on the work done for many years, we have continued to focus on reducing not only fatalities but injuries that occur in the workplace. The widest measure of workplace accidents, the all-injury frequency rate, is 28% better than it was, but clearly, there's more work to be done in this area. The business has been significantly de-risked.
Net debt is down almost half from its peak, despite the fact that we had to self-finance the entire construction of two new mines in Kibali and Tropicana. We achieved that de-leveraging from internal sources only through good old-fashioned cash generation and some asset sales with no, I repeat, no dilution to shareholders. Either way, the stronger balance sheet makes the business more resilient. Over this entire period, we've been delivering a consistent operating and financial performance, meeting our guidance every quarter and every year in a volatile business environment. Finally, one of the true measures of the health of the business is the productivity metric, which has marched steadily upward during this period. That's even before the sale of some of our more labor-intensive South African assets earlier this year.
We have some truly talented miners and engineers in this business who have continued to look for opportunity to do more with less and have invariably come up with the goods consistently. We are producing 58% more gold per employee costed than we did five years ago. If there's one thing you can take from today's presentation, is that there's more from where that came from. I'm truly honored to have served as CEO of this great company for the past five years. Given that I'm a shareholder, you can be assured I'll be glued to the news of its success in the months and years to come.
I thank you all for your interest, your support, and in many cases, your guidance and probing questions over the years as we have come to grips with doing the often unglamorous and boring work of building a self-sustaining gold company in what appears to be a perennial bear market that is poised to deliver value over the long term. With that, I'll hand over to the operator for 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 that will place you in the question queue. If you'd like 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. Ladies and gentlemen, just a reminder, should you wish to ask a question, you're welcome to press star and then one. Sir, we don't seem to have any questions on the lines.
Judith, I have some-
We do have a question from David.
Thank you.
That is David Haughton of CIBC. Please go ahead, sir.
Hello. Good morning, everybody. I think there was a technical snafu there. I had to dial back in. Venkat, thank you very much for your last quarterly update. Best of luck for the future. My first question, I guess, is for Christine. You ran through some of the CapEx expectations for this year, and my particular interest here is looking at the spend at Obuasi. Can you just run through what your expectations are for the balance of the year at Obuasi?
Yes. David, I'd just say that for the full year, we've got.
$102 million spend for Obuasi, and most of that will actually be spent in the second half. There was about $4 million spent in the first half. As you can see.
Yes
As the project gains momentum, the balance is really going to be spent in the second half of Obuasi.
Yes, okay.
spend that way. Yeah.
Yeah. That's slightly below previous expectations, and clearly it's because of a relatively slow start there. What would you think the CapEx spend might be in 2019?
I think overall, we've always said of the $500 million capital, 20% in the first year, 55% in the second year, and the balance in the following year, and that's pretty much what we expect to spend next year.
Okay. After a slow start, the momentum really starts to pick up and it continues on.
That's correct, David.
All right. The other slide in the presentation deck I found quite fascinating was on page 28. Graham had spent some time talking about the upside at Sunrise Dam, and we had the session about a month or so ago to get a better understanding of it. I guess my question on this slide would refer to Gator. You've only got a relatively short life on reserves, but you're targeting something like a 12-year planning life. I presume that that is an underground expectation at Gator.
David, it's Ludwig speaking. Yes, absolutely that's the underground. As we are ramping up at this moment in the underground and do underground exploration, that will increase over time. You will see that I think it's 2.3 years will stretch to longer reserves or larger reserves.
Okay. With the underground ramp up, where do you see the underground throughput going to in excess of a million tons per annum? What would you target?
Well, it won't be the current throughput because with the underground mine, typically it would be half of that, of the open pit throughput. We're looking at more or less the same kind of ounces, maybe a little bit lower ounces, but obviously coming at higher grades. The throughput will be where we are at this moment, around 5.5 would be closer to 3 million tons, where we actually would shut down the SAG mill and only use the ball mill on the mine.
The underground has got potential to feed 3 million tons per annum by itself to the mill?
That's what we're targeting.
When would you expect to be able to get to that 3 million tons per annum rate?
Well, we're looking at around 2021. It all depends because we're still continuing with the open pit exploration program, so that can change depending on if we find any open pit resources. At this moment, I must say it actually looks quite promising.
Okay. To get to that kind of throughput rate, quite a lot of development I would expect would be required to get the number of phases to produce 3 million tons per annum. What sort of development CapEx would you be envisaging?
Well, it's typically what we're looking at this moment, and that's why you can see the ramp of our index Geita mine. Typically, it's anything between $60 million-$90 million, I would say, in total. Yeah. I mean, dollars in that.
Okay. That's $60 million-$90 million through to 2021.
It will taper down by end of 2020.
Okay. The kind of grades that you'd expect at that kind of throughput rate, the grades that we've been seeing recently are in the five-gram kind of level, although the reserve grade or adjusted reserve grade, I guess, is getting closer to six grams. Would you be taking some dilution to be able to get to that three million tons per annum?
Yes. Yes, we will. There will be a range and depending on which pit you're on. Obviously, in the Nyankanga pit is actually the higher grade, and we'll be actually opening up new portals at this moment. It will range anything between five to 6.5 grams, depending on the timing as well, where we are. Maybe more 4.5 to 6.5 as we progress through the different areas.
Okay. Yeah, that's quite a different kind of mine to what I guess we'd been envisaging previously.
Yeah. The grades are much better than Sunrise Dam.
Yeah. All right. I'll just leave it there for someone else. Thank you.
Thank you. The next question comes from John Tumazos of John Tumazos Independent Research.
Thank you very much. Do you anticipate any significant changes as Kelvin succeeds? Barrick's chairman likes what he calls tier 1 gold mines over 500,000 ounces with very low costs. Of course, your largest mine, Geita, doesn't quite reach that threshold. Do you see AngloGold's portfolio of 16 smaller mines as too much of a management challenge?
I'll take that one, actually, Thomas. In terms of your question, really, it's one for Kelvin, if I may. Certainly Kelvin is aware of our portfolio. We have actually slimmed the portfolio down from 21 to around 13 core mines. In reality, I do know that Barrick went on a particular strategy to sort of focus it based on six or seven key assets of large scale and cash flow. That is up to Kelvin in terms of what he wants to do in terms of the portfolio. Certainly he's aware of all the brownfields options which are within our portfolio. Certainly in terms of Brazil, likewise in terms of various parts in Africa and Australia as well. To be fair, I'd rather he answer this question in the next conference call in a month's time or in two months' time.
All right.
Ladies and gentlemen, just a final reminder. If you wish to ask a question, you're welcome to press star 1. We don't seem to have any further questions in the queue. Do you have any closing comments?
No, nothing from our side, operator. Once again, I can thank everyone on the call for the support they have provided, and certainly wishing AngloGold Ashanti many years of prosperity ahead. Thank you.