Dec. 1 (Bloomberg) -- AngloGold Ashanti Ltd., the third-largest producer of the metal, plans to dig the world’s deepest mines in South Africa, where shrinking reserves and stoppages after fatal accidents pushed output to the lowest in a century.
AngloGold has brought together a group including General Electric Co. to figure out how to reach gold in excess of 5 kilometers (3.1 miles) down, or more than a kilometer lower than any other mine, Chief Executive Officer Mark Cutifani said. At the same time it aims to use more machinery to curb fatalities.
“We’re putting the foundations in place for the future, for the next 30 to 40 years in the South African gold industry,” he said in an interview in Johannesburg yesterday, adding the plans may take 5 to 10 years to complete.
South African producers have failed to benefit fully from record gold prices as they dig further to reach dwindling ore, pay higher labor and energy costs, and are forced to halt output following fatal accidents. More than 54,000 miners have been killed in the past century in South Africa’s gold mines, which are the deepest and among the most dangerous in the world.
AngloGold has the potential to mine an extra 100 million ounces of gold by excavating down, Cutifani said. “Even if we get 50 percent of that, it means there is another 30 years of those ounces” for the company to extract, he added. The company expects to produce 4.5 million ounces this year.
The company’s Mponeng operation in South Africa is the deepest mine in the world at about 4 kilometers, while the country’s output last year was the lowest since 1907.
“As a union, our worry with deep-level mining is safety of our workers,” Lesiba Seshoka, a spokesman for the National Union of Mineworkers, said by mobile phone yesterday. “The deeper you go, the more dangerous. As long as they can do it safely, we are happy. They must let us know how.”
South Africa began suspending mining operations following fatal accidents after deaths rose more than 10 percent in 2007 to an estimated 221. Last year, 167 miners lost their lives, according to the NUM, the country’s biggest union.
AngloGold will boost mechanization, previously opposed by some union members because of the threat to jobs, as the company seeks to prevent the risk of increased deaths.
“We wouldn’t be going deeper with the expectation that more people are going to die,” Cutifani said. “One of the safety imperatives is to remove people from areas where accidents are most likely to occur.”
AngloGold, which has about a quarter of its assets in South Africa, is also seeking to reduce the size of its workforce to lower production costs as labor unions demand wage increases at several times the rate of inflation.
More Than Needed
During South Africa’s white rule, which ended in 1994, companies took advantage of cheap black labor, meaning the country’s mines use more workers. Underground seams are also more labor-intensive than surface operations, with AngloGold employing more than 63,000 staff, compared with the 11,900 at Barrick Gold Corp., the world’s biggest producer.
“We probably have more people than we need but we’ve made a commitment to try and size operations over time sensitively,” Cutifani said. South Africa, the continent’s largest economy, had an unemployment rate of 25.3 percent in the third quarter.
South African gold output peaked at more than 1 million kilograms in 1970, the Johannesburg-based Chamber of Mines says.
Gold may rise above $1,500 an ounce, from about $1,390 now, as global central banks print money to buoy their economies, Cutifani said. “The most significant hard currency is gold. I could easily see gold going beyond $1,500 an ounce,” he said.
Harmony Gold Mining Co., Africa’s third-largest producer, doesn’t plan to join AngloGold in digging deeper than its 3.6 kilometer Kusasalethu mine. “I am sure that there is more ore further down but at the moment we have no plans to go there,” CEO Graham Briggs said in an interview yesterday.
To contact the reporter on this story: Ron Derby in Johannesburg at email@example.com
To contact the editor responsible for this story: Amanda Jordan at firstname.lastname@example.org