Gold Fields based in Johannesburg, South Africa says it will invest $1.4 billion to increase the lifespan of its Damang Gold mine in the Western Region, to allow the mine to keep operating.
According to Gold Fields, the reinvestment plan will extend the life of the mine by eight years from 2017 to 2024.
“It will enhance the Group’s presence in one of its key operating regions and will result in significant social benefits for Ghana, including the creation and preservation of 1,850 direct jobs,” Gold Fields said in a statement on Monday.
The mining firm expects to produce 1.56 million ounces of gold, within the eight-year period, at an all-in cost of $950 an ounce.
The project will produce 225,000 ounces of gold a year, according to the miner.
“This is a classic Brownfield opportunity,” Chief Executive Officer Nick Holland said in an interview with Blooomberg. “It makes logical sense from all angles for us to do this.”
“This is a first step in what may well be a much longer mine life in time to come,” Mr. Holland said, adding that “the project will extract less than half of Damang’s four million ounces of gold resources.”
The benefits of the development agreement signed between Gold Fields and the Government of Ghana in March, have been key inputs into the plan and enhances the economics of the project, the statement said.
Gold Fields signed the agreement with Ghana linking royalties payments to the bullion price and lowering the corporate tax rate to 32.5 per cent from 35 per cent.
“Damang reinvestment was planned at a gold price of $1,200 an ounce, so we’ve got some headroom and, importantly, the breakeven price at Damang is $1,050 an ounce so we’ve got a $200 ounce cushion before the project starts becoming uneconomic,” Mr. Holland told Reuters.
Gold was trading at around $1,265 per ounce in London last Monday.
Since operations at Damang commenced in 1997, the mine has produced in excess of 4.0 million ounces, sourced from multiple open pits, but production has declined since 2013 as ore grades have been lower than expected.
Mining has since been focused on the margins of the Damang pit, the Huni, Juno and Saddle areas — as well as lower grade satellite deposits.
The decline has been exacerbated by variations in grade in the northern and southern extremities of the DPCB and the satellite pits where grades have been lower than expected.
Consequently, a strategic review of Damang commenced last year which identified that Gold Fields should return to mining the higher grade core of the main Damang orebody.
Gold Fields said in the statement that it will also retain the option of expanding the operation at Damang should the gold price strengthen sustainably to above $1,400 per ounce.
In a quarterly output update, Gold Fields reported its total gold production in the three months to September 30 was 537,000 ounces, four per cent lower than in the corresponding period a year earlier.
Gold Fields maintained its guidance for attributable equivalent gold production for 2016 at between 2.10 million and 2.15 million ounces.
SOURCE: Ghanaian Times