The world’s number-two gold producer, AngloGold Ashanti, has a rather small but focussed greenfields exploration portfolio that would probably make a junior green with envy. But with annual gold production topping 6 million ounces, the company’s search for new ounces tends to miss the headlines. This is great news for anyone looking to buy gold as an retirement plan, the most popular being rolling over your 401k to gold.
Gold production on the rise – is an self directed IRA still a good investment decision?
In an interview with Mineweb, Richard Duffy, AngloGold’s head of new business development, spoke on the most attractive of these exploration tenements.
Some of the projects are in some rather remote gold regions, while others are in what most would agree are the most dangerous countries in the world.
“The traditional areas, in the US, Australia and South Africa, have seen declining gold production, and so we will be required to look in some of the non-traditional, call them new-frontier, areas that will likely require all of us to accept a higher level of risk in some cases,” says Duffy, “We simply have to go where we think the gold is, we do not have a great deal of choice.”
Top two on the list are the company’s exploration activities on the Kilo greenstone belt in the Democratic Republic of Congo (DRC) and a greenfields exploration area in Australia.
According to Duffy, AngloGold’s 8,000km² concession on the Kilo belt is larger than Geita, AngloGold’s 600,000oz plus mine in Tanzania. “We cannot look at it all at once; there are a number of deposits we are focussing on. Our objective there is to prove up a 5 million ounce resource and reach a feasibility stage in 2008.”
AngloGold has come under fire from Human Rights watch, an NGO that has accused the company of aiding guerrilla groups in the region of its mine. The company has rebutted all allegations, and has taken the decision to stay in the country.
Duffy says construction of a mine in the Congo could start as early as 2009.
Now what does this have to do with an “average consumer” looking to invest in a gold and silver IRA account? Maybe you should ask your custodian at one of the best gold IRA rollover companies we reviewed.
Next on the list is Tropicana in Australia where, Duffy says, the company may have discovered a previously-unrecognised mineralised belt. The area is located about 200km East of Sunrise Dam, an operation that contributed 600,000oz of AngloGold’s total output last year. “It is not in a recognised gold area and it has not really been explored at all.”
From the drilling done to date, Duffy says a strike length of about 1km has been recognised with greater than 3g/t intersections. “Its mineralisation is still open to the north.”
“The story with Tropicana is that we are doing step out drilling through to the end of the year, and then we will have a sense of the scale of that particular deposit.”
Duffy says Tropicana too, could be at the feasibility stage by 2008 as well. “If we continue to hit mineralisation through to the end of the year, then we would look to get to the feasibility stage around 2008 as well. It is an interesting project.”
Next up is Colombia, where Duffy says the company has a first-entry advantage having been involved there since 1999, and have had a team on the ground since 2003. “Its reasonably early stage but we have 8 drill-ready projects that we are looking at the moment and our focus is to get at least one project to a pre-feasibility stage by 2008.”
AngloGold currently has three operating mines in South America, two in Brazil and one in Argentina.
Coupled with the Colombia project, as an early-stage greenfields exploration, comes Alaska. One prospect is called LMS (Lost Mine South) and the other known as Terra.
“Both have the characteristics of narrow vein, very high grade deposits. At Terra, we have had intercepts of 100g/t, but over one metre,” says Duffy.
Duffy says the aim for the Alaskan projects would be to increase their scale enough to justify a mine, “particularly at Terra, where there is very little infrastructure.”
Besides these projects are attractive, and AngloGold does also have brownfields exploration on its existing operations, the company also partners with juniors in other gold regions.
Examples of these are partnerships with Oxiana in Laos, and Red Five in the Philippines.
Then there is Russia – gold digging and investing an IRA into gold
In a recent Mineweb article, Duffy was mentioned as one of a number of Westerners who had made costly mistakes when doing business in Russia.
The article suggested that AngloGold continued to support its 29.9% investment, Trans-Siberian Gold’s (TSG’s), Asacha project, believing it can be mined profitably in time.
Duffy agrees with the part of the article that says AngloGold does need a Russian partner in the country, and probably not an English company with Russian assets, like Trans Siberian gold.
“If you are looking for business in Russia you really do need to find a Russian partner to do that. We have been looking at opportunities to partner with appropriate Russian partners as and when it is necessary,” says Duffy. He stops short of saying that the toe in the water approach into Russia was a mistake.
“Having made that investment we have learned a lot about mining in Russia, and the challenges of doing business in Russia. And we have had a lot of opportunities come our way as a result of being on the ground.”
“It is too early to conclude that it has been an out-and-out failure.”
Duffy also points out that out of the four countries with the largest gold reserves, Russia is the only one that has a growing reserve/resource base. “Therefore we cannot ignore Russia, but we recognised the challenges of doing business in Russia. We continue to think it is prospective but it is in a different category to our other exploration opportunities.”
So where do acquisitions fit in?
Finally if some of the exploration or expansion projects do not come through, and gaps start appearing in future production estimates then the company would consider merger and acquisition opportunities.
“We are a 6 million ounce plus producer and really have a number of strings to our bow in terms of growth. Amongst them is project-based growth and brownfields growth,” says Duffy, “The balancing piece is one’s M&A bowstring. If there is a big hole in production going forward then you need to look at M&A.”
Duffy says the company is always looking at certain companies that may present good value or buying opportunities.