Ashanti, AngloGold boost reserves at Geita

Geita District, Tanzania — Tanzania’s mining renaissance owes much to the pioneering spirit of Ashanti Goldfields (ASL-N) and AngloGold (AU-N), which set out, in the late 1990s, to broaden their operating horizons beyond their respective home bases of Ghana and South Africa. Thanks to those efforts, the Geita mine is again the largest gold producer in East Africa, though it bears no resemblance to the historic mine that once held this status.

Geita began life in 1936 as a small underground operation that treated 5.5 million tonnes averaging 5.3 grams until 1966, when it was nationalized and closed. Today Geita is a modern, open-pit mine that boasts an overall resource of 111 million tonnes averaging 4 grams gold, or about 14.6 million contained ounces. Operations began last June, and by the end of 2000, 176,863 oz. gold had been produced at an average grade of 2.94 grams per tonne. Ongoing production is expected to average 466,000 oz. annually at a total cash cost of about US$190 per oz. for at least 10 years.

Geita’s renaissance, though, was triggered by the exploration efforts of Cluff Resources and Samax Resources in the early 1990s. The juniors were among the first to blaze a trail into the Lake Victoria district shortly after Tanzania opened its doors to foreign investment. Ashanti acquired Cluff for US$180 million in early 1996, and then went on to make a major discovery that transformed the Geita project into something well beyond the modest resource known to exist at the time.

Harry Michael, managing director of the Geita joint venture, said the big moment came in May 1996, when a soil anomaly led to a blind discovery at Nyankanga. By early 1998, the deposit hosted a resource of 2.3 million contained ounces.

“Not only was it found under cover; the host rock was a diorite, rather than the typical banded iron formation,” he added. “The grades were higher than what we had been seeing elsewhere, and the setting suggested excellent potential for resources to be expanded in the years ahead.”

Samax, meanwhile, had outlined a resource of 1.2 million oz. at its nearby Kukuluma discovery. Ashanti acquired Samax in late 1998, thereby boosting its overall resource to 4.43 million oz., sufficient to begin planning a 4-million-tonne-per-year mine. A feasibility study was in hand by year-end, and Ashanti’s board gave the green light for construction of the US$165-million mine to begin in early 1999.

By May of that year, equipment and personnel were being mobilized to the site. Work progressed well, until Ashanti was caught offside with its hedge book during an upward spike in gold prices that September. The company was forced to place half of Geita on the block as part of a restructuring program aimed at reducing overall debt. The sale attracted the attention of most of the world’s senior producers.

The competition was fierce, but AngloGold prevailed by selling itself to Ashanti as a fellow African company experienced in developing mines on the continent. The deal struck in the spring of 2000 gave AngloGold a 50% stake in Geita for US$205 million cash and US$130 million in project financing. A joint venture was formed that gave each company equal representation and voting rights.

“Geita easily met our hurdle for investment,” said Peter Turner, manager of AngloGold’s African operations. “We looked for at least two million ounces, cash costs below US$200 per oz., and a double-digit rate of return.”

As part of the deal, AngloGold contributed its Nyamulilima Hill prospect, 12 km from Geita. Work then continued on two fronts: mine construction, and exploration to expand reserves and resources.

Exploration

The original Geita Hill mine was hosted by highly folded rocks dominated by banded iron formation (BIF), with interbedded andesite and felsic tuff. Mining also took place at Lone Cone and North East Extension, which, like Geita Hill, form the crest of ridges.

No previous mining had taken place at Nyankanga, which was covered by up to 15 metres of barren ferricrete. It lies 600 metres west of Lone Cone and is believed to be an extension of the main North East Extension-Geita-Lone Cone shear zone. The western and central portions of the orebody are hosted by a sub-circular diorite intrusive, though, in the northeastern portion, the diorite becomes increasingly interbedded with BIF, indicating a transition into the BIF and andesite seen at Lone Cone.

Nyankanga is by far the most important deposit outlined at Geita. It hosts an overall resource of 40.6 million tonnes averaging 5.76 grams, or 7.53 million oz. Of this total, 5.8 million oz. are classified as surface resources, whereas the underground resource contains 1.72 million oz.

Other major deposits are Geita Hill (22.4 million tonnes of 2.64 grams), Kukuluma (7.62 million tonnes of 3.47 grams), Matandani (12.69 million tonnes of 2.98 grams), Lone Cone (4.93 million tonnes of 3.48 grams), and Area 3W (2.7 million tonnes of 2.67 grams). Stockpiles, Star and Comet, Roberts and Ridge 8 make up the remainder.

Last year’s infill deep drilling program at Nyankanga produced impressive results, including 26 metres grading 25.4 grams, 22 metres at 20.2 grams, and 28.1 metres of 11.7 grams. These results helped boost Geita’s reserves at year-end to 7.8 million ounces within 63.5 million tonnes grading 3.8 grams gold per tonne — a 41% increase over the previous year. The bulk of this reserve — some 5 million oz. — is found within the open pit at Nyankanga.

A feasibility study is nearing completion for an underground operation at Nyankanga. It is expected to add 500,000 oz. to the reserve base, at grades of between 4 and 8 grams per tonne.

“The study uses a cutoff grade of 3 grams for the underground,” Michael told visiting analysts. “It looks do-able with a decline coming off the existing open pit. There isn’t much difference in the metallurgy from the open-pit [ore], and we expect 90% recoveries.”

Meanwhile, ongoing exploration is focused on generative work for shallow open-pit targets under transported cover. Only 5% of the prospecting licences have been explored, and, with 75% of the ground under transported cover, the partners intend to make use of pathfinder techniques to find other blind deposits similar to Nyankanga.

Encouraging results have already been obtained from the Chipako prospect, 6 km northwest of the plant site. Results from the shallow drill program include 32 metres of 2.2 grams and 16 metres of 4.5 grams. More work is planned to test the new mineralized zone.

Operations

The Geita mine sits inside a secured compound that encompasses not just the mine and mill and related facilities, but also includes comfortable living quarters and amenities for managers, expatriates and their families.

“Having our families here is a great morale-booster,” Michael says. “The same is true for our local workforce, who live with their families in nearby villages. There are no single barracks at Geita.”

Nyankanga is the first open pit to be mined, and will be followed by smaller pits at Lone Cone, Kukuluma, Geita Hill and Matandani. Costs and production rates will fluctuate in the years ahead, owing to grade variability within the deposits.

Operations are conducted by a contractor, using conventional open-pit techniques and a fleet of hydraulic excavators and 100-tonne trucks. The stripping ratio will average 4.6-to-1 over the mine life.

The processing plant was sized to treat 4 million tonnes of ore per year, but potential exists for this to be expanded to 7 million tonnes with little incremental capital. The 9.14-metre-diameter semi-autogenous grinding (SAG) mill is one of the largest in the world.

The plant was designed to treat a blend of oxide, transitional and sulphide ore using conventional gravity concentration and a carbon-in-pulp (CIP) circuit. It was also engineered to handle the high abrasive index in the transition and primary ore zones, and the timber and metal that typically result when areas with extensive underground workings are mined.

Like most new mines, Geita experienced some startup problems, including problems with the SAG mill liners and lubrication systems for both the SAG mill and the primary crusher. However, the plant is now operating at nameplace capacity, and metallurgical recoveries are in line with feasibility projections.

While the mineralogy is not overly complex for the bulk of Geita ore, some of the potential satellite deposits (including Matandani) contain arsenopyrite and other sulphides that may result in lower recoveries.

Electricity is supplied by a new, diesel-powered, 46-MW power plant, though the joint venture is investigating the possibility of developing a lower-cost, longer-term power solution through integration into the local grid, or through a provision to heavy fuel oil.

A 67-km road was constructed from Ilogi to Geita, providing an uninterrupted transport route into Dar es Salaam. Geita has a water pipeline from Lake Victoria that makes water freely available to villagers along the route.

On the social front, the joint venture keeps local villages informed of its activities on a monthly basis. It has also developed HIV-awareness programs for employees and their families. The mine has also generated many local improvements, such as schools and medical facilities.

Geita has a permanent workforce of 500, including 440 Tanzanians, and provides employment to 368 contractors.

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