Johannesburg – Randgold Resources agreed to lead and fund a plan to rebuild AngloGold Ashanti’s Obuasi mine in Ghana that ceased underground operations last year.

Under the joint venture, Randgold will submit a plan for the mine by the end of January, after which the companies will each fund their share of the redevelopment, they said in a joint statement on Wednesday. Randgold, which already partners with the Johannesburg-based company at the Kibali mine in the Democratic Republic of Congo, will operate the Obuasi mine.

Should they go ahead with the redevelopment of Obuasi, it should cost less than $1 billion, Randgold Chief Executive Officer Mark Bristow told reporters in Ghana’s capital, Accra. While the mine presented “a very big challenge”, it may be turned into a world-class mine, he said. If approved, development may start in mid-2016, with production following two years later. Output estimates range from 300 000 ounces annually to 600 000 ounces, he said.

“The market does not ascribe much value to Obuasi in the AngloGold share price,” UBS AG said in a note to investors. “We are also of the belief the market thinks highly of Randgold’s ability and skills to operate in challenging conditions. Given this development, we see greater potential for the market to start ascribing more value to Obuasi.”

Randgold, which also runs bullion mines in Mali and Ivory Coast, has been looking for new projects to add to its flagging pipeline, either through exploration or acquisitions. It is currently developing no new mines and its last major discovery was Gounkoto in Mali in 2009, the same year it bought the Kibali with AngloGold. AngloGold has been seeking partners for Obuasi as part of a drive to sell assets and reduce debt.

Obuasi is located 320km north-west of Accra. The mine, which currently contains more than 5 million ounces of gold, would need to have reserves of at least 6 million ounces for Randgold to commit to restarting it, Bristow said. UBS values it at about $1 billion.

“Pooling the extensive expertise and the capital of these two companies will improve our ability to bring Obuasi’s world-class high-grade gold deposit to account,” AngloGold CEO Srinivasan Venkatakrishnan said in the statement.

* With assistance from Kevin Crowley in Johannesburg