Integrated Annual Review 2012 Annual Financial Report 2012 Mineral Resources and Mineral Reserves Regional overview  
 

1.2 Operation: Agnew

Introduction

The Agnew mine is located 23km west of the town of Leinster, 1,100km north-east of Perth – and sits within the same highly prospective geological region as St Ives. The mine produces from the Waroonga underground mining complex (comprising the Kim, Main and Rajah ore bodies) as well as the Songvang open pit. The lease area includes exploration and mineral rights covering a total area of 68,138 hectares.

Strategic overview

Following our Portfolio Review in the second half of 2012, we have withdrawn from the low-grade and marginal Main and Rajah lodes to instead focus only on the high-grade Kim Lode. Although this will result in slightly lower production in 2013, it will also reduce unit costs and improve Agnew’s immediate cashgeneration performance.

Performance overview

During 2012, total production decreased to 176,600 ounces (2011: 194,000 ounces). This reflected operational challenges encountered during the first half of the year, which included:

  • Poor ground conditions at the Main Lode ore body (resulting in lower underground volumes mined and processed)
  • Lower underground and surface yields
  • Reduced mining rates on the Kim ore body due to a change in the plunge of mineralisation, which is no longer a challenge
  • The ongoing high turnover of skilled employees

This resulted in a 29% drop in production in the first quarter and stable production in the second quarter. However, production improved dramatically as a result of the refocusing of our mining activities on the high-grade Kim Lode and our withdrawal from the Main and Rajah lodes. This supported an increase in production of 28% between the second and third quarters – and a further 15% increase between the third and fourth quarters – marking a major turnaround for the mine. Indeed, the fourth quarter marked Agnew’s highest producing quarter since September 2006. The NCE margin improved to 46% in the fourth quarter, one of the highest in the Group.

Meanwhile, net operating costs increased by 14% from A$128 million (US$133 million) to A$146 million (US$152 million) due to the draw-down of Songvang stockpiles in 2012, compared with a build-up of Songvang stockpiles in 2011. Mining operations at Songvang were completed in February 2012.

In 2012, the mine’s NCE margin remained relatively steady at 29% (2011: 32%). This reflected capital expenditure of A$60 million (US$62 million) mainly focused on underground development of the Kim ore body, exploration (mainly at the Waroonga underground complex) and the purchase of additional mining equipment.

Near-mine exploration

Agnew offers significant exploration opportunities, and is implementing an ongoing and aggressive near-mine exploration programme (known as the High Grade Shoots Project). This is focused on resource modelling three high-grade extensions to mineralisation at the Waroonga mining complex (the Hastings, Fitzroy and Bengal shoots) – and on drilling the Link Zone between Kim and the High Grade Shoots to define high-grade mineralisation intersected in 2011. Waroonga has been a consistent source of high-grade ore for a number of years and comprises the bulk of Agnew’s production and Mineral Reserve.

Results from this activity – as well as drilling on a conceptual target 500 meters north of Waroonga – have been encouraging.

2013 outlook

Planned production at Agnew is estimated at between 150,000 ounces and 160,000 ounces of gold at a total cash cost of A$700/oz (US$728/oz) and an NCE of A$990/oz (US$1,030/oz). This plan assumes:

  • Ongoing focus on the high-grade Kim Lode
  • Continuation of new-mine exploration

Key indicators

Figure 1.8: Optimising our operations indicators – Agnew

  Category   2012   2011   2010   2009   2008  
  Gold produced – attributable (’000oz)   177   194   152   188   201  
  Total cash cost (A$/oz)   799   672   684   536   524  
  Notional Cash Expenditure (NCE) (A$/oz)   1,150   1,062   1,098   799   701  
  Gold price (A$/oz)   1,610   1,564   1,326   1,241   1,034  
  Operating profit (A$m)   139   175   96   133   98  
  Operating costs (A$m)   143   134   105   99   101  
  Operating margin (%)   49   58   48   57   47  
  NCE margin (%)   29   32   17   36   32  
  Fatal Injury Frequency Rate   0   0   0   0   0  
  Lost Time Injury Frequency Rate   3.931   2.72   1.11   2.13   2.23  
  Energy consumption (TJ)   420   439   339   356   368  
  CO2-e emissions (’000 tonnes) (Scope 1 & 2)   49.4   49.6   40.6   42.9   45.7  
  Water withdrawal (million liters)   1,094   1,287   1,213   1,564   1,096  

  Category   2012   % of Group total  
  Attributable Mineral Resources (million oz)   3.50   2  
  Attributable Mineral Reserves (million oz)   1.15   2  

  Category   2012   2011   2010   2009   2008  
  Total employees   256   235   212   158   136  
  Employee wages and benefits (A$m)   34   27   21   20   21  
  Total taxation and royalties paid (A$m)   7   8   0   0   0  
  SED spend (A$)   15,000   11,000   n/a   n/a   n/a  


1 Excludes restricted work cases – 16.69 if such cases are included