Randgold Resources and AngloGold Ashanti will form a joint venture to redevelop and operate AngloGold Ashanti’s Obuasi gold mine in Ghana. Randgold will lead and fund a development plan designed to rebuild Obuasi as a viable long-life mining business with an attractive cost structure and returns.

Obuasi, located in the Ashanti region of Ghana 320 km northwest of the capital Accra, is a large, high-grade deposit with proven and probable ore reserves of 24.53 million metric tons (mt) at 6.7 g/mt for 5.29 million oz, part of a substantial mineral resource base. In 2012, AngloGold Ashanti initiated a program to modernize the mine, principally by starting to develop a ramp access that will ultimately run from surface to high-grade blocks of ore underground. The ramp will supplement current vertical hoisting infrastructure and help debottleneck the underground operation by allowing for greater ease in transporting people and materials underground, and transporting ore to surface. This is a necessary step ahead of the envisaged transformation of the mine into a modern, mechanized operation.

At the end of 2014, AngloGold Ashanti converted Obuasi to limited operations, ceasing underground production, retrenching the workforce, but continuing to process tailings and starting a feasibility study on the redevelopment of the mine. Development of the decline ramp has continued over this period.

The development plan will build on this feasibility study with the intention of establishing a more focused, efficient, mechanized high-grade operation, and is expected to take about four months to complete. If the development plan meets both parties’ investment criteria, and assuming all other conditions are satisfied, Randgold and AngloGold Ashanti will form a new joint venture company.

Randgold and AngloGold Ashanti will then be jointly responsible for funding the redevelopment of Obuasi in line with the agreed development plan. A Randgold group entity will be appointed as operator of the mine, and Randgold and AngloGold Ashanti will appoint an equal number of directors to the board of the joint venture company, with board and shareholder decisions to be approved by both parties.

“Obuasi is a world-class resource,” said Mark Bristow, chief executive, Randgold. “We now have to see if we can convert it into a world-class mine. We have a long history of cooperation with AngloGold Ashanti and we look forward to working with them again on charting a new course toward a viable future for Obuasi.”

“Since 2012, AngloGold Ashanti has affected a range of improvements to modernize Obuasi and — in line with its strategy — has progressed a feasibility study as the critical next step toward breathing new life into this important mine,” said Srinivasan Venkatakrishnan, CEO, AngloGold Ashanti. “Our partnership with Randgold has proved successful for well more than a decade in bringing value from sustainable gold mining to all stakeholders and we believe that pooling the extensive expertise and the capital of these two companies will improve our ability to bring Obuasi’s world-class high-grade gold deposit to account.”

Randgold is expected to deliver the new development plan to both parties’ boards by January 31, 2016. Formation of the joint venture is conditional on the satisfaction of a number of conditions, which include the approval by the boards of Randgold and AngloGold Ashanti of the final development plan prepared by Randgold, approval of the transaction by lenders.