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Johannesburg - The Tropicana Gold Project in Western Australia‚ in which gold miner AngloGold Ashanti (ANG) has a 70% stake‚ remains on schedule to begin production in the December 2013 quarter.

Releasing a progress update on Thursday AngloGold said since the project was approved in November 2010‚ Tropicana’s Mineral Resource has grown by 2.8 million ounces‚ and the potential for extensions to the known ore zones and the discovery of additional ore within trucking distance of the processing plant remains high.

Tropicana is located 330 kilometres east-northeast of Kalgoorlie in Western Australia.

The Mineral Resource as at 30 December 2012 has grown to 118 million tonnes grading 2.08 grams per tonne containing 7.89 Moz of gold.

This growth primarily reflects additional drilling carried out as part of the Havana Deeps Pre-Feasibility Study (PFS)‚ targeting the down plunge and along-strike extents of the Havana ore body outside the current Havana Pit‚ the company noted.

Gold production in the first three years of operation remains in the range of 470‚000- 490‚000 oz per annum at slightly increased cash costs of between A$590/oz-A$630/oz‚ compared to a forecast of A$580/oz-A$600/oz at approval.

The increase is largely due to higher fuel prices‚ which were also impacted by the reduction in fuel rebates associated with the introduction of the carbon tax.

At approval‚ Tropicana had a life of 10 years and exploration success has extended this to more than 11 years.

Life of mine (LOM) production has increased slightly to 3.6 Moz from 3.45 Moz at approval‚ while LOM cash costs remain in the original range of A$710/oz-A$730/oz. It is likely LOM production will increase as more of the Mineral Resource is converted into Ore Reserves.

Ore Reserves have increased by 15%‚ or 0.5 Moz‚ since approval to 56.4 Mt at 2.16 g/t for 3.91 Moz. Updated Ore Reserves will be released on completion of the Havana Deeps PFS which is examining the economic trade-off between open pit and underground mining of the Havana Deeps Mineral Resource. The PFS will be completed during 2013.

Engineering design and procurement activities are now complete and all major equipment items have been delivered to the site. At the end of the December 2012 quarter construction was 55.6% complete‚ AngloGold noted.

With the award during the quarter of the major Structural‚ Mechanical & Piping and Electrical & Instrumentation contracts‚ the Joint Venture partners can now provide an update on the project capital costs.

On a 100% project basis‚ the estimated capital expenditure has increased to between A$820-A$845 million - an 11% increase on the mid-point of the capex range forecast at the time the project was approved in November 2010. At that time capital expenditure (nominal) was forecast to be between A$725-$775 million.

AngloGold Ashanti 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.

This increase is in line with additional contingencies held at the Board level‚ with the new estimates 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‚” he said.

“Even in this environment the team has done very well to contain project costs through tight scope and schedule control‚ in contrast to many other resources projects currently in construction.

“Progress to date has confirmed our confidence in the strength of Tropicana and exploration continues to deliver the upside we believed was present at approval.

“Pre-commissioning will begin in the third quarter leading to the commencement of production and production ramp-up in the fourth quarter‚” he concluded. - I-Net Bridge