Operational review

Cost and revenue optimisation initiatives through Business Process Re-engineering (BPR)

The BPR process which commenced during the second half of 2010 is ongoing. All operational production processes and associated cost structures from the stope to the mill are continuously being reviewed. New business blueprints and appropriate organisational structures were implemented to support sustainable gold output at an NCE margin of 20 per cent in the short to medium term and 25 per cent in the long-term from our existing operations as a basis of continuing our strategy of paying industry leading dividend levels and reinvesting the balance into sustaining and growing the company.

South Africa region

BPR in South Africa continues with various initiatives planned to deliver savings of approximately R500 million over the next two years. Negligible benefits were generated in the June quarter. Year to date, BPR benefits in South Africa amounted to R29 million.

Initiatives for improving quality mining and delivering full stoping potential are ongoing and include safety initiatives to improve compliance and behaviour, together with focus on face length optimisation and labour planning to provide the correct skills mix. It also includes a focus on quality blasts to improve blasting frequency i.e. full panel blasting, full face advance and a product size which is optimal in achieving a good milling result. Initiatives also include leadership training to ensure people skills are developed and optimised, and a drive for compliance to procedures and processes.

At KDC specifically, the Shaft Full Potential (SFP) programme has achieved good results with higher gold production in the June quarter. Crew productivity was stable, despite additional in-stope roof bolting to improve safety. However, with the aforementioned SFP interventions in place to address labour, face advance, and material availability, further improvements in crew productivity are targeted for the September quarter and beyond. Face length availability has increased by approximately 1.4 kilometres since the beginning of the year, providing opportunities to add more crews and increase volumes produced.

The mechanisation of development ends at the long life shafts of KDC and Beatrix (South Deep is already mechanised) is aimed at improving safety and productivity, reducing development costs and increasing ore reserve flexibility through higher monthly development advance rates. Ninety one per cent of flat-end development metres advanced at long-life shafts was achieved by mechanised means, a 2 per cent increase compared with the March quarter. This project is thus largely completed. The drill rigs operating on the long-life shafts at Beatrix and KDC achieved an average rate of 39 metres per rig per month in the June quarter, which was similar to that achieved in the March quarter, against a target of 38 metres per rig.

Progress against the Mine Health and Safety Council (MHSC) milestone, that no machine or piece of equipment, such as pneumatic development rock drills, pneumatic stope rock drills, hydropower rock drills and drill rigs, fans and winches, may generate a sound pressure level in excess of 110dB (A) after December 2013, is ongoing. The number of measurements expressed as a percentage of noise measurements of machinery and equipment emitting noise in excess of 110dB (A) reduced to nil readings for the June quarter from 0.6 per cent in the March quarter. Silencing of equipment is ongoing with continued focus on replacing blocked and/or damaged silencers on machines. A further measure to identify sound pressures above 85dB (A) has been introduced and currently the percentage of employees exposed above this level is 64.8 per cent. This measurement is without ear protection. Studies indicate that with the proper use of currently available ear protection devices no employee will be subject to a sound pressure level in excess of 85dB (A). A project to measure exposure whilst using hearing protective devices, to provide further verification is set to start in the September quarter.

The Group continues to pursue best practice in the area of dust control in accordance with the MHSC. In order to improve upon dust exposure targets, the Group is targeting the following core initiatives:

Building health rooms at the training centres to coach employees on potential exposures and wearing of respiratory personal protective equipment;
Using foggers, a water mist spray system, to trap dust particles liberated in haulages and tipping points to prevent dust from entering the main air stream;
Installing dual stage tip filter units, where the filters are equipped with an additional layer of filtration material to improve the efficiency of old technology filter bags in order to increase dust filtration;
Managing the opening and closing of ore transfer chutes between levels so that they remain closed when not in use to reduce airborne dust entering the work place;
Treating footwalls with binding chemicals sprayed from a specially designed car pulled by a loco to prevent dust from being liberated into intake air ways; and
Analysing individual filters to assist in determining exposure levels.

West Africa region

Tarkwa

BPR initiatives are ongoing. The major BPR projects for 2012 include:

Commissioning and integration of the secondary crusher at the CIL plant. This is expected to achieve a 5 per cent improvement in the milling rate from 950,000 tonnes to 1 million tonnes per month. The secondary crusher was commissioned in the March quarter. The planned ramp-up of the secondary crusher to 75 per cent of nameplate capacity for the June quarter was achieved and it is expected that the crusher will operate at full production from the December quarter;
Waste strip acceleration. This is planned to be achieved through the implementation of a larger sized load and haul fleet. The improved flexibility is also designed to ensure a continuous ore supply to the plant. Commissioning of the larger sized load and haul fleet is scheduled for the December quarter. This could increase the annual mining volume by as much as 10 per cent; and
The construction and commissioning of an in-pit satellite fuel depot. The benefits that will accrue include shorter haul distances for re-fueling, fuel consumption cost savings and improved productivity. Construction was completed in the June quarter and full implementation is scheduled for the September quarter. This initiative is expected to deliver approximately US$30 million in cost savings over the life of mine. Commissioning and full implementation of the in-pit satellite fuel depot is scheduled for the September quarter.

Damang

BPR initiatives are ongoing. The major BPR projects for 2012 include:

Continued savings from owner mining and maintenance initiatives implemented in early 2011;
The implementation of an additional shift which is providing flexibility to accelerate waste stripping and increase mining volumes to ensure a continuous ore supply to the plant. The new shift has also improved utilisation of mining equipment. Implementation was completed in the March quarter with full productivity benefits achieved in the June quarter; and
The plant circuit is being optimised to achieve the maximum recovery rate under current blend conditions. This is by way of the introduction of a pre-leach thickener to control the circuit water balance and an intensive leach reactor to maximise gravity gold recovery. An additional CIL leach tank is being added to the circuit to improve the residence time and circuit reliability. These projects are scheduled to be completed in the December quarter.

The introduction of owner mining has resulted in a decrease in mining costs from US$4.35 per tonne, which was the contractor cost per tonne prior to conversion to owner mining (2010), to US$3.43 per tonne. Added to this, the additional shift has resulted in an increase in tonnes mined from approximately 6 million tonnes per quarter to 8 million tonnes per quarter, reducing costs further from US$3.43 per tonne to US$2.92 per tonne mined (current quarter). As a result, based on year to date volumes, benefits of US$27 million have been achieved against contract mining of which US$10 million accrued in the June quarter.

Australasia region

St Ives

St Ives continues to focus on business improvement. The transition to owner mining continued at the open pits. For the remainder of the year, a combination of contract and owner mining will be undertaken at the open pits until the full fleet is delivered. This project is expected to reduce open pit operating costs significantly and has the potential to increase open pit reserves by reducing cut-off grades.

A key underground project to improve drill rig productivity and to decrease stope dilution through greater drilling accuracy is underway. The total value of this project is estimated at A$7 million per year, realised through both cost savings and revenue generation.

The business improvement team is facilitating the implementation of a new and improved fleet management system. This aims to ultimately increase productivity and efficiency at the surface and underground operations through the optimisation of mine control with real time information about location, equipment and people, thereby improving the mobile fleet efficiency as well as equipment availability and utilisation. In addition, a mine management and reporting solution to integrate production information is scheduled to go live at the end of August 2012. The key benefits include an improved reconciliation process, quality of data captured and integration of operating systems.

Agnew

At Agnew, business improvement projects with planned benefits of A$8 million were identified for 2012.

A paste fill optimisation project was initiated and completed during the quarter. This was due to a number of incidents whereby paste was not able to be delivered correctly to the underground stopes, either as a function of incorrect paste mixing, paste delivery due to pipeline blockages, lines not extended sufficiently to meet paste delivery schedules or stopes not being completed and ready to receive paste on time. The paste fill optimisation programme utilised internal resources and external specialists to advise on necessary improvements which included optimisation of mix ratios, delivery systems and scheduling. Operational responsibilities have been reviewed and responsibility under the new paste regime has been insourced.