Randgold Resources and AngloGold Ashanti have concluded an investment agreement aimed at the formation of a joint venture to redevelop and operate AngloGold Ashanti’s underground Obuasi gold mine in Ghana. AngloGold Ashanti converted Obuasi to limited operations at the end of 2014, ceasing underground production and retrenching the workforce, but continuing to process tailings and starting a feasibility study on the redevelopment of the mine.

Obuasi is located in the Ashanti region of Ghana, 320 km northwest of the capital Accra. The project hosts a large, high-grade deposit, with proven and probable ore reserves of 24.53 million mt grading 6.70 g/mt and containing 5.29 million oz of gold, as well as substantial additional resources.

The redevelopment agreement calls for Randgold to lead and fund a development plan designed to rebuild Obuasi as a viable, long-life mining business with an attractive cost structure and returns. The plan is expected to take about four months to complete and will build on the current, ongoing feasibility study, with the intention of establishing a more focused, efficient mechanized high-grade operation. If the plan meets both companies’ investment criteria, and assuming all other conditions are satisfied, Randgold and AngloGold Ashanti will form a new joint-venture company. Assuming formation of this company, Randgold and AngloGold Ashanti will then be jointly responsible for funding the redevelopment of Obuasi in line with the 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.

Randgold estimates that redevelopment costs will be less than $1 billion. Production could be in the range of 300,000 to 600,000 oz/y.

Randgold expects to deliver the new development plan by January 31, 2016.

Randgold and AngloGold Ashanti currently have ongoing joint-venture agreements at the Kibali mine in the Democratic Republic of the Congo (45% Randgold, 45% AngloGold, and 10% Sokomo, a government company) and at the Morila mine in Mali (40% Randgold, 40% AngloGold, and 20% government of Mali).