AngloGold, Newmont Expanding

AngloGold Ashanti Ltd. (AU), the world’s third largest gold producer, plans to expand output through exploration. The company aims to produce up to 6 million ounces annually, up from 4.98 million ounces in 2008, largely by improving its mines and expanding through exploration.

AngloGold expects the dollar price of gold to rise. The company has forecasted gold prices of $950 to $1,100 per ounce in 2010. It expects gold prices to rise beyond $1,100 if the downtrend in the US economy continues and investment demand for gold increases further. Although electricity costs and new wage settlements have put pressure on the company’s bottom line, it has no plans to lay off workers to save costs.

AngloGold is also planning to develop its La Colosa project in Colombia. In July this year, AngloGold had teamed up with African miner Randgold Resources to buy Moto Goldmines, which owns a project in the mineral-rich Democratic Republic of Congo. AngloGold has made an equity offering of 7.6 million shares priced at $37.25 per share. The company plans to use the proceeds of $284 million from the offering to fund the transaction.

Additionally, the Johannesburg-based AngloGold has formed a venture with De Beers to explore for gold and other minerals undersea. The venture will focus on deposits on continental shelves. De Beers, the world’s largest diamond producer, is 45% owned by Anglo American Plc. The Oppenheimer family of South Africa owns 40% and Botswana the rest.

AngloGold Ashanti will hold interests in the joint venture through its wholly owned offshore subsidiary, AngloGold Ashanti Marine Exploration Limited (AGAME) and De Beers will hold its interests in the joint venture through its wholly owned subsidiary, De Beers Group Exploration Holdings Limited (DBGEX).

AngloGold’s major peer, Newmont Mining Corporation (NEM) is also planning to increase its exploration activities and may increase exploration expenditure by 25% next year. The company is planning to expand existing mines.

Newmont currently own mines in Nevada, Peru, Australia/New Zealand, Indonesia and Ghana. Newmont has recently acquired 100% interest in the Boddington mine in Western Australia, after completing the purchase of a 33% stake from AngloGold. Boddington, which produced its first gold last month, will be Australia’s largest producer once it reaches full capacity of 1 million ounces a year.

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