Review of operations: Brazil (PDF - 320 KB)

Review of operations

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Brazil

AngloGold Ashanti's operations in Brazil comprise the wholly owned AngloGold Ashanti Minera??o (formerly Morro Velho) and a 50% interest in Minera??o Serra Grande. In 2005, these mines produced 346,000 attributable ounces of gold at a total cash cost of $169 and $158 per ounce respectively.

AngloGold Ashanti Minera??o

Description: The AngloGold Ashanti Minera??o complex is located in the municipalities of Nova Lima, Sabar? and Santa B?rbara, near the city of Belo Horizonte in the state of Minas Gerais in south-eastern Brazil. Since the closing of the Mina Velha underground mine in 2003 and the Engenho D'?gua open pit in 2004, ore is now sourced only from the Cuiab? underground mine and the C?rrego do S?tio heap-leach operation. In January 2005, the board approved a major expansion at Cuiab?.

Geology: The area in which AngloGold Ashanti Minera??o is located is known as the Iron Quadrangle and is host to historic and current gold mining operations, as well as a number of open-pit limestone and iron ore operations.

The geology of the Iron Quadrangle is composed of Proterozoic and Archaean volcano-sedimentary sequences and Pre-Cambrian granitic complexes. The host to the gold mineralisation is the volcanosedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas SuperGroup (RDVS). The upper sequence of the RDVS is the metasedimentary Maquin? Group.

Cuiab? mine, located in the municipality of Sabara, has gold mineralisation associated with sulphides and quartz veins in Banded Ironstone Formation (BIF) and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for gold mineralisation with a common association between large-scale shear zones and their related structures. Where BIF is mineralised the ore appears strongly stratiform due to the selective sulphidation of the iron-rich layers. Steeply plunging shear zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears and other structures.

The controlling mineralisation structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile environment. The host rocks at AngloGold Ashanti Minera??o are BIF, Lapa Seca and mafic volcanics (principally basaltic). Mineralisation is due to the interaction of low salinity carbon dioxide, rich fluids with the high-iron BIF, basalts and carbonaceous graphitic schists. Sulphide mineralisation consists of pyrrhotite and arsenopyrite with subordinate pyrite and chalcopyrite; the latter tends to occur as a late-stage fracture fill and is not associated with gold mineralisation. Wallrock alteration is typically carbonate, potassic and silicic.

Operating performance

Volumes processed at AngloGold Ashanti Minera??o declined in the first quarter of 2005 as a result of decreasing tonnages from both the C?rrego do S?tio and Cuiab? mines. The situation was exacerbated when heavy rains resulted in the accumulation of waste material during this period. However, production recovered from the second quarter, aided by the addition to production from the clean-up of the old Morro Velho facilities and higher heap-leach recoveries at C?rrego do S?tio, so that year-on-year volumes increased by 15%. Consequently, gold production rose by 4% to 250,000 ounces although the yield achieved decreased by 11% to 6.76g/t.

Total cash costs increased by 27% to $169 per ounce, largely as a result of an appreciation in the Brazilian real, inflation and the high cost of the clean-up of old production facilities at Morro Velho. These were partially offset by higher production and acid by-product credit.

Gross profit, adjusted for the effect of unrealised non-hedge derivatives, increased by 7% to $48 million as prices received improved.

Capital expenditure rose significantly as work began on the expansion project (see below).

AngloGold Ashanti Minera??o   2005 2004 2003 Pay limit (oz/t) 0.11 0.11 0.09 Pay limit (g/t) 3.86 3.85 3.16 Recovered grade (oz/t) 0.197 0.222 0.200 Recovered grade (g/t) 6.76 7.62 6.84 Gold production (000oz) 250 240 228 Total cash costs ($/oz) 169 133 141 Total production costs ($/oz) 226 191 199 Capital expenditure ($ million) 71 32 25 Total number of employees 2,597 2,243 2,236    Employees 1,363 1,222 1,286    Contractors 1,234 1,021 950

Gold production (000oz) AngloGold Ashanti Minera??o

Total cash costs ($/oz) AngloGold Ashanti Minera??o

Capital expenditure ($m) AngloGold Ashanti Minera??o

Growth prospects

In January 2005 the board approved a project to increase production at the Cuiab? mine from 830,000 tonnes per annum to 1.3 million tonnes per annum, at an estimated capital cost of $121 million. In July 2005, additional capital of $5.5 million was approved for the upgrade of the power supply and main substation to 230kV. This should result in a reduction in energy costs.

The Cuiab? expansion project will involve the deepening of the mine from 11 level to 21 level and an increase in production from 190,000 ounces to 250,000 ounces per year from the beginning of 2007. The project is currently in progress and on schedule. Construction and commissioning are scheduled for 2006 and production ramp-up is scheduled for the beginning of 2007. By December 2005, committed capital expenditure amounted to about $100 million.

The Lamego conceptual study was completed in December 2004. A pre-feasibility study began in 2005 and will continue into 2006. The access ramp to the Carruagem orebody reached its target in December 2005 and development of this orebody and trial mining are scheduled for 2006. The drilling campaign will continue in 2006.

At C?rrego do S?tio, metallurgical testwork on samples of ore from the Cachorro Bravo orebody continued in 2005. Results are being analysed. Additional testwork is scheduled for 2006 with samples from other orebodies. Drilling will continue in 2006 in Carvoaria Velha, Laranjeiras, Cristina and other orebodies.

As part of the pre-feasibility study, the development of the drift connecting the Cachorro Bravo and Carvoaria Velha orebodies will continue in 2006. Trial mining is planned for the Cachorro Bravo orebody to provide data for mine planning. It is planned to open the Laranjeiras orebody to increase ore resources.

Outlook

In 2006, production is expected to decrease to between 234,000 ounces and 244,000 ounces, at an estimated total cash cost of between $164 per ounce and $170 per ounce. Capital expenditure will rise to between $98 million and $103 million, with some $70 million being spent on the Cuiab? expansion project, $16 million to stay in business and $15 million on other projects including Lamego ($4 million) and C?rrego do S?tio ($8 million).

Serra Grande

Description: Serra Grande is located 5 kilometres from the city of Crix?s, in the north-western area of the Goi?s State in central Brazil. AngloGold Ashanti and Kinross Gold Corporation each own 50% of Serra Grande. The operation comprises two underground mines, Mina III and Mina Nova.

Geology: The deposits occur in the Rio Vermelho and Ribeir?o das Antes formations of the Archaean Pilar de Goi?s Group which together account for a large proportion of the Crix?s Greenstone Belt in central Brazil. The stratigraphy of the belt is dominated by basics and ultra-basics in the lower sequences with volcano sedimentary units forming the upper successions.

The gold deposits are hosted in a sequence of schists, volcanics and carbonates occurring in a typical greenstone belt structural setting. The host rocks are of the Pilar de Goi?s Group of the Upper Archaean. Gold mineralisation is associated with massive sulphides and vein quartz material associated with graphitic and sericitic schists and dolomites. The ore shoots plunge to the north-west with dips of between 6 degrees and 35 degrees. The stratigraphy is overturned and thrusts towards the east.

The greenstone belt lithologies are surrounded by Archaean tonalitic gneiss and granodiorite. The metamorphosed sediments are primarily composed of quartz, chlorite, sericite, graphitic and garnetiferous schists. The carbonates have been metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding wallrock, usually associated with quartz veining. The basalts are relatively unaltered but do show pronounced stretching with elongation of pillow structures evident. The ultra-basics form the western edge of the belt and the basic volcanics and sediments form the core of the unit. The northern edge of the belt is in contact with a series of laminated quartzites and quartz sericite schists of the Lower Proterozoic Araxa Group and a narrow band of graphitic schists and intermediate to ultra-basic volcanics. This latter group is known as the Allocthon Mina Dos Ingleses (AMDI) and is host to a series of garimpeios workings north of the town of Crix?s where the talc schists are mined. The general stratigraphy of this unit is similar to that seen in the main greenstone belt although on a smaller scale. However, the mineralisation in the northern area exhibits a higher level of base metal mineralisation with sphalerite and galena present.

Operating performance

Volumes mined and processed at Serra Grande remained steady, while the yield increased by 2% to 7.93g/t given the higher grade of the quartz veins. As a result, attributable gold production rose by 2% to 96,000 ounces.

Total cash costs rose by 18% to $158 per ounce, largely as a result of the appreciation in the Brazilian real, higher primary development capitalisation and higher production costs.

Consequently, attributable gross profit, adjusted for the effect of unrealised non-hedge derivatives, rose by 22% to $22 million. This was aided by the increase in the received gold price.

Capital expenditure of $13 million was 86% higher than that for the previous year and was spent mainly on primary development and mine equipment acquisition

Serra Grande 2005 2004 2003 Pay limit (oz/t) 0.09 0.09 0.08 Pay limit (g/t) 3.02 3.17 2.78 Recovered grade (oz/t) 0.231 0.228 0.230 Recovered grade (g/t) 7.93 7.80 7.88 Gold production (000oz) – 100% 192 187 190 Gold production (000oz) – 50% 96 94 95 Total cash costs ($/oz) 158 134 109 Total production costs ($/oz) 205 178 163 Capital expenditure ($ million) – 100% 13 7 7 Capital expenditure ($ million) – 50% 6.5 4 3 Total number of employees 775 710 642    Employees 566 514 519    Contractors 209 196 123

Gold production (000oz) Serra Grande

Total cash costs ($/oz) Serra Grande

Capital expenditure ($m) Serra Grande

Growth prospects

Plant capacity is planned to increase from current capacity of 750,000 tonnes to 800,000 tonnes annually to compensate for lower grades. An exploration programme is also planned to improve resources and reserves from deeper areas of the Mina III and lower levels of Mina Nova and Structure IV. Additionally, a study will be carried out to prove the viability of mining the Mina III open pit.

Outlook

Production at Serra Grande is expected to decline to between 186,000 ounces and 194,000 ounces (between 93,000 ounces and 97,000 ounces of attributable production) in 2006 at a total cash cost of $179 per ounce to $187 per ounce. Capital expenditure of $12 million ($6 million attributable) is planned.