By FRANK ASAELI
LIHIR Gold Ltd (LGL) will proceed with a major upgrade of its Lihir Island operations that would lift gold production capacity to approximately one million ounces annually from 2011.
The upgrade, approved by the board of directors last Friday, has been the subject of a thorough 12-month feasibility study which concluded that it would provide a healthy return, position LGL for increased output, lower cash costs and more reliable and consistent production.
The study concluded that the upgrade will increase production by an average 240,000 ounces per year over the life of the operation and lift output over the period from 2011 to 2021 by 2.35 million ounces to more than 10 million ounces.
LGL chief executive officer Arthur Hood said the decision to proceed with the expansion represented a major step in the development of the company.
“This upgrade will lift the Lihir Island operation to the appropriate scale to extract full value from the 23 million ounce gold deposit,” he said.
“We already mine more than one million ounces of gold each year at Lihir, of which we have traditionally processed approximately 600,000 to 700,000 ounces, with the remainder stockpiled.
“This investment in additional processing capacity will allow us to match our processing throughout rates with our mine production, reduce stockpiling of ore, entrance returns to our stakeholders and become a more reliable and consistent producer over many more years of operation on Lihir Island,” Mr Hood said.
Studies also concluded that upgrade would increase production by in excess of one million ounces over the life of the operation due to improved processing efficiencies.
The upgrade would also provide potential for additional reserves to be established due to the improved project economics, extending the life of the operation.
The upgrade will reduce costs of production by US$80 (K237) per ounce, following commissioning in 2011 and boost operating cashflows and deliver a significant uplift to net present value.
It will also create operational flexibility to ensure more reliable and consistent production.