West Africa region

Ghana

Tarkwa

Gold production decreased by 5 per cent from 185,300 ounces in the March quarter to 176,300 ounces in the June quarter due to a decrease in CIL throughput and a lower head grade delivered to the mill.

Total tonnes mined, including capital stripping, increased from 33.2 million tonnes in the March quarter to 33.6 million tonnes in the June quarter. Ore mined decreased from 5.9 million tonnes to 5.8 million tonnes. Mined grade decreased from 1.28 grams per tonne in the March quarter to 1.23 grams per tonne in the June quarter largely due to scheduling. The strip ratio increased from 4.6 to 4.8 in line with the plan.

The CIL plant throughput decreased from 2.83 million tonnes in the March quarter to 2.81 million tonnes in the June quarter due to reduced mill availability. Yield decreased from 1.51 grams per tonne to 1.45 grams per tonne in line with the reduction in mined grade. The CIL plant produced 131,400 ounces in the June quarter compared with 137,500 ounces in the March quarter.

Total feed to the North and South heap leach sections decreased from 3.18 million tonnes to 3.08 million tonnes. Yield decreased from 0.47 grams per tonne for the March quarter to 0.45 grams per tonne in the June quarter. The High Pressure Grinding Roller facility (HPGR) at the South heap leach section processed 0.89 million tonnes, compared with 1.04 million tonnes in the March quarter. The North heap leach section processed 2.19 million tonnes in the June quarter, compared with 2.14 million tonnes in the March quarter. The heap leach operation produced 44,900 ounces compared with 47,800 ounces in the March quarter. The decrease was attributable to a decrease in tonnes processed and dissolution due to a harder ore blend.

Operating costs, including gold-in-process movements, increased from US$106 million (R825 million) in the March quarter to US$114 million (R917 million) in the June quarter due to lower inventory build-up. Total cash cost increased from US$595 per ounce in the March quarter to US$663 per ounce in the June quarter due to the lower production and lower inventory build-up.

Operating profit decreased from US$205 million (R1,593 million) in the March quarter to US$171 million (R1,382 million) in the June quarter as a result of the lower revenue and the increased net operating cost. Capital expenditure increased from US$47 million (R369 million) in the March quarter to US$60 million (R480 million) in the June quarter, with expenditure on pre-stripping and additional mining fleet being the major items.

Capital expenditure increased from R130 million (US$17 million) to R188 million (US$23 million) due to the slow startup of spend on capital at the beginning of the financial year. The majority of the capital expenditure was on infrastructure upgrades and ore reserve development.

Notional cash expenditure increased from US$916 per ounce in the March quarter to US$1,033 per ounce in the June quarter due to the decrease in production and increase in capital expenditure. The NCE margin decreased from 45 per cent to 36 per cent.

On 16 July, Tarkwa received a directive from the Environmental Protection Agency (EPA) of Ghana to stop discharging water from its heap leach facilities.

The new EPA directive requires that all water discharges from the mine’s heap leach facilities should be treated through a water treatment plant to reduce conductivity levels. Conductivity is a measure of the amount of dissolved salts in discharged water and is classified internationally as a non-toxic pollutant.

Although we believe that Tarkwa was in full compliance with all environmental laws and regulations in Ghana, we have, in pursuit of environmental best practice and world class environmental stewardship, and to comply with the directive, committed to installing new water treatment plants before the end of the year.

On 9 August, the EPA lifted the temporary suspension. Both heap leach facilities at Tarkwa are now back to full production. The loss of production for the September quarter is expected to be around 15,000 ounces.

Damang

Gold production decreased by 14 per cent from 44,300 ounces in the March quarter to 38,200 ounces in the June quarter due to reduced mining volumes related to continued safety concerns in the southern interface between the Juno and Damang pit cutback. The rate of mining and access to the traditionally higher grade areas in the Damang pit cutback were restricted as a result of the above safety consideration.

Tonnes processed decreased from 1.22 million tonnes in the March quarter to 0.93 million tonnes in the June quarter. In order to improve the plant reliability the milling rate was reduced from 630 tonnes per hour to 550 tonnes per hour. In addition the grind size of the ore in the mill was reduced from 80 per cent passing 180 micrometre to 80 per cent passing 106 micrometre. As a consequence of these changes, recovery improved by 1.4 per cent. As the plant is ageing, preventative maintenance was increased to provide sustainable processing capacity, particularly given the increase in reserves and resources and extended mine life. We anticipate that maintenance capital expenditure of approximately US$20 million will be spent over the next nine months on improving plant reliability and recovery by way of adding an eight leach tank and upgrading the gravity circuit.

Total tonnes mined, including capital stripping, decreased from 9.8 million tonnes in the March quarter to 8.9 million tonnes in the June quarter. This decrease was due to the rainy season reducing the utilisation of the mining fleet. Ore mined decreased from 1.5 million tonnes to 1.1 million tonnes. The strip ratio increased from 5.7 to 6.8.

Operating costs, including gold-in-process movements, increased from US$36 million (R279 million) in the March quarter to US$38 million (R308 million) in the June quarter, mainly due to a lower gold-in-process credit in the June quarter compared with the March quarter. Total cash cost increased from US$838 per ounce to US$995 per ounce mainly as a result of lower gold produced.

Operating profit decreased from US$39 million (R302 million) in the March quarter to US$23 million (R189 million) in the June quarter as a result of lower revenue and increased costs.

Capital expenditure increased from US$27 million (R211 million) in the March quarter to US$29 million (R234 million) in the June quarter, with the majority of expenditure on prestripping, exploration and the acquisition of mining fleet. The high level of pre-stripping is necessary to open up the significant reserve potential at Huni and Juno.

Notional cash expenditure increased from US$1,490 per ounce in the March quarter to US$1,799 per ounce in the June quarter. The NCE margin decreased from 12 per cent to negative 11 per cent due to the lower gold production and higher capital expenditure.

The installation of the pre-leach thickener and intensive leach reactor, as part of the plant optimisation project, are progressing well and are due for commissioning in the December quarter. These enhancements should result in an increase in gravity recovered gold, thereby improving the overall plant yield. The revised production guidance for 2012, at this point, is estimated at approximately 175,000 ounces.