APA GROUP will build a gas transmission pipeline worth an estimated $140 million to supply AngloGold Ashanti gold mines in Western Australia’s eastern goldfields, the companies have announced.

The two agreements will see APA Group develop a new 292 kilometre gas transmission pipeline – the Eastern Goldfields Pipeline – that will connect AngloGold Ashanti’s mines to APA’s existing pipelines.

The pipeline will transport gas from Yarraloola at the northern tip of the Goldfields Gas Pipeline to AngloGold’s Sunrise Dam and Tropicana gold mining operations via the lateral pipeline at the Murrin Murrin nickel mine.

Under the agreements, APA will transport gas a total distance of 1,500 kilometres to the mines through three of its interconnected pipelines – the Goldfields Gas Pipeline, the Murrin Murrin Lateral and the new Eastern Goldfields Pipeline.

Engineering, design and procurement work has commenced, with construction to start in February 2015 and completion expected prior to January 2016 when gas transportation services are due to commence.

APA managing director Mick McCormack said the pipeline would extend the company’s portfolio.

“While the pipeline’s construction is underpinned by long-term gas transportation agreements with AngloGold Ashanti, the Eastern Goldfields Pipeline can be further expanded to service other mines in the region in addition to these initial contracts,” he said.

“Access to natural gas, a reliable and cost competitive energy supply, will assist our new and existing customers in reducing costs at their mining operations.”

AngloGold Ashanti said the gas would be used for local power generation, displacing diesel fuel and LNG transported by road, with the power stations at both mines modified in order to run on 100 per cent natural gas, while retaining diesel backup capability.

The company’s senior vice president Australia, Michael Erickson, said the agreement would provide a continuity of fuel supply, reduce exposure to a volatile diesel prices and reduce the number of trucks on the road.

“Gas power generation is expected to reduce cash operating costs at both sites by between A$25-$30/ounce,” he said.

While AngloGold Ashanti holds 100% of Sunrise Dam, Tropicana is a joint venture between AngloGold Ashanti (which holds a 70% operating stake) and Independence Group (30%).