AngloGold Ashanti's New Technology: A Game Changer?

AngloGold Ashanti (NYSE:AU) is the third-biggest producer of gold, and it operates in South Africa, which was once the top producer of gold worldwide.

Now, however, China, Australia, the United States, Russia and Peru all rank above the country in terms of gold production. As such, AngloGold has implemented a new technology, reef boring, to ensure that it is able to mine every last ounce of gold from its projects.

“This is a game changer, or a paradigm shift,” CEO Srinivasan Venkatakrishnan said in an interview with Bloomberg. “If we do nothing, the gold industry is in terminal decline.”

The company’s new machines remove only gold-bearing ore and replace it with cement and chemicals that stabilize the structure. That means AngloGold needs to treat less rock and is able to operate 24 hours a day, according to Venkatakrishnan.

“This opens up areas that we cannot otherwise mine,” he also said to the news outlet. “It also opens up areas which we have left behind for infrastructure support.”

By February 19, the new technology had produced 40 kilograms of gold from ore with grades of more than 200 grams of gold for each tonne mined, according to Mining Weekly. The South African Technology, as it has come to be known, has only been used in areas inaccessible to conventional methods so far. It is in the research and development phase.

“We continue to invest in the South African technology piece,” Venkatakrishnan told the publication, calling it the “single key we have to improve productivity, which is the answer to a number of issues within the South African mining industry.”

The technology has allowed the company to cut drilling times, improve backfill procedures and crush core to paste for easier processing, as per Mining Weekly. Drilling times have decreased from 30 to three and a half days, with the ultimate target being two days.

“The new machines we are manufacturing are doing a very good job,” Venkatakrishnan added. Indeed, such a good job that AngloGold has been able to build more production sites — namely a second at Tau Tona and more at Kopanang, Great Noligwa and Moab Khotsong, Mining Weekly states.

Further, 2013 brought AngloGold all-in sustaining costs of $1,015 per ounce and yearly production of 4.105 million ounces of gold, the first time the company’s output has risen in nearly 10 years.

Will this technology challenge the market?

With its new technology, AngloGold can complete production and drilling activities in very little time, and seemingly with quite a low overhead cost. Whether other producers in the region, or indeed worldwide, will find themselves pressed to keep up for success remains to be seen. However, such an outcome seems likely given the advantages of the technology AngloGold is using.

That said, it is important to note that AngloGold has no plans to keep its technology exclusive. “We’ve not sought to keep this to ourselves,” Venkatakrishnan said. “We’re looking at the greater good of South Africa.”

Gold and platinum miners in the country have already begun to ask AngloGold about the possibility of making use of its technology, which can be adapted to fit any ore body depth and width. Rather than making AngloGold a fearsome competitor, this technology may bolster South Africa back to its former heights of gold production.