South African gold giant AngloGold Ashanti is unlikely to add its share of the Tropicana gold mine in Western Australia’s Goldfields to the sale block as its joint venture partner IGO eyes a potential $1 billion pay day from its minority stake.
The Johannesburg-based major’s Australian head Michael Erickson said on the sidelines of the Diggers and Dealers mining forum in Kalgoorlie on Tuesday that AngloGold was “not a seller of assets” and could pursue more operations in Australia.
Erickson declined to be drawn on whether AngloGold was aiming to swallow up IGO’s share of the mine, one of the biggest in Australia, saying it was a matter for the company’s global bosses to assess.
IGO has initiated a review of its 30 per cent stake in the mine to underpin its shift in focus towards nickel and other battery metals, with reports suggesting the stake could draw as much as $1 billion in the present buoyant gold market.
Erickson said analysts’ valuations he had seen were closer to $700 million.
On those metrics the totality of the 400,000 ounce a year mine and AngloGold’s larger 70 per cent share could draw many multiples of that from a growth hungry gold producer either overseas or at home.
Erickson described Tropicana as a “great asset”, and indicated AngloGold was happy to retain its exposure to the Australian market after completing a mass sell off of its South African mines.
“We’ve now sold all our South African assets and I think it’s well known that the company likes the Australian jurisdiction, we’ve got extremely predictable regulations and so forth,“ he said.
“It’s a very good address, we’ve actually said that M&A (mergers and acquisitions) activity is back on our agenda globally, we’re generating good cash and we’ve now got a balance sheet that’s better than it’s ever been.
“We’ve been selectively selling assets that are shorter mine life, higher cost, and we see Australia as a really important jurisdiction from a portfolio, risk point of view. We actually don’t want to sell more high quality gold production, which is what we see Tropicana as.”
Tropicana was regarded as Australia’s best greenfields gold discovery this century when it was discovered in remote climes 300km north-east of Kalgoorlie by IGO and AngloGold geologists in 2005.
Since its official opening in 2014 it has become a cornerstone asset in AngloGold’s Australian portfolio, and one of the top performers across its three million ounces a year worldwide production base.
AngloGold’s older Sunrise Dam gold mine south of Laverton has faced concerns in recent years with higher costs and underground grades declining.
But Erickson said a major $130 million investment will be made in exploration at Sunrise Dam over the next three years in an attempt to boost underground resources and improve returns.
“Sunrise Dam remains at the higher end of the cost performance, now it’s not because we’re not doing things well, it relates to the grade,” he said.
“What we’re doing is investing very significantly in exploration at Sunrise Dam. We’re spending some $130 million over the next three years. We’ll be drilling hundreds and hundreds of thousands of metres and already we’ve identified a new ore zone.”
Sunrise Dam produced 116,000 ounces through June 30 this year, generating a $US43 million ($60 million) profit on the back of higher prices.
By Josh Chiat.