PERTH (miningweekly.com) - Gold miner AngloGold Ashanti on Thursday said that its 70%-held Tropicana project, in Western Australia, remained on schedule to start production during the December quarter of this year, albeit at a higher cost.

In a statement to shareholders, the miner noted that gold production for the first three years remained in the range of between 470 000 oz/y and 490 000 oz/y. However, cash costs for the operation had increased slightly, owing to the reduction in fuel rebates associated with the introduction of a carbon tax.

At approval, the Tropicana project had a mine life of ten years, with recent exploration success extending this to more than 11 years. The project currently has a mineral resource of 118-million tons, grading 1.08 g/t for 7.89-million ounces of gold.

At a 100% project basis, the project would require a capital investment of between A$820-million and A$845-million, which was an 11% increase on the mid-point of the capital range forecasted at the time of project approval.

AngloGold CEO Mark Cutifani attributed the higher forecast to significant increases in construction labour costs, and decreased productivity, which had resulted in higher on-site labour requirements.

However, he noted that this increase was in line with additional contingencies, and added that the new capital estimates were consistent with the top-end cost range flagged at the time of approval.

“The West Australian construction market is overheated and this, along with extreme skills shortages, has impacted labour productivity and, subsequently, costs.”

Cutifani noted that progress to date had confirmed AngloGold’s confidence in the strength of the Tropicana project, and exploration continued to deliver the upside the company believed was present at approval.

“Pre-commissioning will begin in the third quarter, leading to the start of production and production ramp-up in the fourth quarter,” he added.

The first phase of mining fleet mobilization was completed, and the contractor started mining ahead of schedule, with more than 3.3-million cubic metres mined by the end of 2012.

The next phase of mobilization was scheduled to start in February 2013.