Jan 23, 2010

LGL joins ranks of 1 million ounce producers


GLOBAL gold company Lihir Gold Limited (LGL) delivered its fourth successive year of record gold production in 2009, with output exceeding one million ounces for the first time in the company’s history.
Production for the year totaled 1.12 million ounces, up 27 percent on the prior 12 months and in line with market guidance. Output rose to 278,000 ounces in the final quarter, an increase of 19 percent over the preceding three month period.
The LGL group maintained its track record as one of the world’s low cost producers with total cash costs for the year of US$397 (K1,052.40) per ounce. Fourth quarter total cash costs were $454 (K1,203.40) per ounce, down from $487 (K1,290.92) per ounce in the September quarter.
In 2010, output from LGL’s three producing operations is expected to be in the range of 960,000 to 1.06 million ounces. Group production is forecast to rise to 1.3 million ounces in 2012 as expansion projects lift output at Lihir Island and Bonikro.
Chief Executive Officer Phil Baker said the full year production result had advanced LGL decisively into the elite ranks of gold miners producing more than one million ounces of gold per year.
“Operationally the company performed very strongly in 2009, enabling us to meet market guidance for both gold production and unit cash costs,” Mr Baker said. “Going forward we aim to achieve consistent and reliable performance at all our operations, delivering on our guidance and keeping expansion projects on track.”
LGL’s production growth in 2009 was due to a combination of record output at the cornerstone Lihir Island operation, together with a full 12-month production contribution from the Bonikro and Mt Rawdon mines acquired in mid-2008.
Full year production at Lihir Island totaled a record 853,000 ounces in 2009, up from 771,000 ounces in 2008 and well in excess of the 770,000 – 840,000 ounces forecast for the year. The Million Ounce Plant Upgrade progressed into construction in 2009, with the project on track to lift gold production at Lihir to an average of one million ounces from 2012.
“The strong result from Lihir Island confirms the enhanced reliability of the operation following the various improvements we’ve implemented over recent years,” Mr Baker said.
In Côte d’Ivoire, the Bonikro mine produced 150,000 ounces in its first full year of production, within the guidance range of 130,000 to160,000 ounces. Strong progress was made in the feasibility study examining the potential to develop new deposits at Hiré, approximately 10 kilometres from Bonikro, and regional exploration activities continued to generate encouraging results.
At Mt Rawdon, in Queensland, gold production reached 108,000 ounces, above the 90,000-100,000 ounces forecast for the year.
In 2010 LGL has forecast production at Lihir Island of between 770,000 – 840,000 ounces, approximately 110,000 – 130,000 ounces from Bonikro and 80,000 – 90,000 ounces from Mt Rawdon. Total cash costs are forecast to be below US$450 (K1,192.84) per ounce.
The company will release its 2009 full year financial results on 18 February 2010.

Oil, metals down

WEAK energy demand continues to weigh down oil prices with the US Energy Information Administration reporting a 1.8 percent drop in refinery activity to its lowest level in at least 20 years, barring occasional periods of hurricane-related refinery outages reports PNG Industry news.

Options Express senior commodities analyst Mike Zarembski told Dow Jones Newswires refineries did not want to produce when demand was lacklustre and the money was not there.

The refinery rate overshadowed a 400,000 barrel dip in US crude inventories and a 3.3 million barrel drop in distillate stocks, including heating oil and diesel.

Oil was also affected by US President Barack Obama's proposal to limit the size of financial institutions and prevent commercial banks from engaging in certain investment activities, including owning hedge funds and proprietary trading.

Singapore's Tapis crude closed down from $US79.58 (K210.95) per barrel on Wednesday to $79.06 (K209.60)/bbl on Thursday.

Meanwhile, copper dropped off overnight to its lowest level this year.
The red metal was trading at $7250.75 (K19,220) per tonne on the London Metal Exchange, its lowest price since December 29.

Earlier this week, traders were expecting copper to bounce back over $7500 (K19,880.70)/t but concerns that China may tighten its monetary policy pushed the metal downwards.

However, Macquarie Bank expects copper imports to China to reach up to 850,000t this quarter, compared with 620,000t in the last quarter of 2009.

It was a similar story for gold this week, with the precious metal trending lower.
Gold opened the week at $1130.50 (K2,997) per ounce on the Comex division of the New York Mercantile Exchange, but closed at $1103 (K2,924)/oz overnight.

Spot gold dipped below $1100 (K2,916)/oz, closing at $1096(K2,905)/oz overnight.
Despite hurting other commodities, Obama's plans are expected to boost the price of gold.

"We believe that gold prices are likely to recover, based on loose US monetary policy, no significant change in gold lease rates, and expectations of still-strong global commodity demand," HSBS analyst James Steel told Dow Jones.

Oil Search spins Gobe drill bit

OIL Search has begun drilling a well in PPL 219, Southern Highlands province, targeting a seismically defined conventional area analogous to the producing SE Gobe oil field reports PNG industry news.

The company began drilling the Wasuma-1 well on January 18 and was yesterday drilling ahead at a depth of 920m.

Wasuma-1 is an oil prospect about 7 kilometres northeast of the SE Gobe oil field. The well is targeting both the Iagifu and Toro sandstones with mean potential recoverable reserves estimated at 25 million barrels.

The well is expected to take 40-45 days to drill to a depth of 2400m and may be deepened to test another target subject to the results.

Oil Search holds a 71.25 percent interest in Wasuma-1 while Nippon Oil Exploration Company has 28.75 percent.

Simberi finds more gold

... Over 200,000oz expected in 2012

By Freelance reporter - YEHIURA HRIEHWAZI

SIMBERI gold mine on Tabar Islands, New Ireland, has discovered new high grade gold at its Pigiput deposits that are expected to pump up production to 200,000 ounces (oz) a year in 2012.

At current gold prices, this junior miner is expected to rake in over $US200 million (K540m) annually. The good news is also expected to shoot up the company's share prices and its total capitalization. The mine is 100 percent owned by Allied Gold of Australia and listed on the Australian, Toronto and London stock exchanges.

The mine which recently made news headlines for the wrong reasons - government-ordered shutdown over health and safety issues - had resumed production two weeks ago. Its current production is 75,000oz - 80,000oz a year. 

Information  released to the stock markets on Friday said Simberi gold mine is on track to deliver in excess of 200,000 oz a year after reading high grade samples from diamond drill cores at its Pigiput deposit which is part of its ongoing 17,000m drilling program that is nearing completion.

A resource/reserve upgrade will follow, underpinning a minimum 100,000oz per annum sulphide expansion pre-feasibility study which is due in coming months.

Allied Gold executive chairman Mark Caruso said on Friday that the results were an integral part of the Oxide and Sulphide studies aimed at lifting gold production from the current 75,000-80,000oz per annum to in excess of 200,000oz per annum in 2012 from both Simberi's oxide and sulphide ore open-pit sources.

He said: "Today's drilling results, particularly the recent result from SD068 which include a down hole intercept of 314m from 2.82g/t gold from 70m, continue to highlight the grade and depth potential of the Simberi mine and its associated satellite deposits of Pigiput and Pigibo."
The Pigiput prospect lies in the central part of Allied's 100 percent owned mining lease ML136.

Allied said that as its Phase II resource drill-out programme nears completion, the latest results supported the study, which foresees production at Pigiput kicking off at 100,000oz per year. The studies target increasing total oxide and sulphide production to in excess of 200,000oz per year by 2012.

The Phase II program will be completed by the end January 2010 and Phase III will continue through the March 2010 quarter.

The latest drilling and assay results from 11 diamond core holes have further defined the extent of gold mineralisation, which still open to the north east. A further seven holes were completed and two are in progress.

The gold intercepts have expanded the data available for a resource update for the deposit. Both resources and reserves for the Pigiput and adjacent Pigibo deposits are scheduled for re-estimation by the end of the first quarter in 2010. Further drill testing of the extents of gold mineralistion at both prospects, is set to continue in Phase III.

Big jump for InterOil shares

By freelance reporter YEHIURA HRIEHWAZI

INTEROIL share prices took another big leap up last Thursday on the New York Stock Exchange on announcement that its Antelop-2 appraisal well had encountered oil shows.

A statement on the oil shows was released to the New York Stock Exchange (NYSE) on Wednesday night and to the Port Moresby Stock Exchange at 10am yesterday. Local investors are unmoved by the announcements and the PomSOX prices remain at K90/ share which is equivalent to $US33 -  the NYSE price in May 2009.  
The shares  jumped 12 percent to trade at $US81 (K228) per share on the announcement making it one of the fastest growing stocks on the NYSE. Last year the shares quadrupled from about $30 (K84.5) to over $70 (K197) by the end of the year in reaction to various pronouncements by the company. Among the reports to the NYSE were the first world-record flow of 385 million cubic feet of gas per day at Antelope-1 and the next record breaker of 705mcf/day  in Antelope-2. 

One of the market analysis companies, Raymond James, which consistently follows InterOil's performance said yesterday: "This morning, InterOil announced the confirmation of oil shows from its Antelope-2 appraisal well. The obvious question is: Does this amount to a commercial oil discovery? Additional testing will be required to determine this, which could take up to a month or even longer."

It said the company had its sights set on drilling laterally into the potential oil leg, a move that should provide a far clearer glimpse at this lower, liquids-rich zone.

" After IOC shares reached an all-time high two weeks ago, a fairly neutral drilling update took some of the wind out of its sails and sent the shares drifting lower - a natural result of some profit-taking in the face of apparently inflated market expectations. Today's news release has once again perked investors' ears, but what has really changed?"

" As it stands, this confirmation of oil shows essentially restates what the market has already known from the days of Antelope-1. While confirmation of oil commerciality would certainly be a "game changer" for the story - in that it would enable much more rapid cash flow generation relative to liquids-stripping, to say nothing of LNG, since the oil could be shipped by barge directly to the company's refinery - we would still caution investors from calling this an oil discovery just yet," it said.

"Let's rewind back to the Antelope-1 sidetrack, in which InterOil encountered a potential oil leg spanning nearly 300 feet in height. Oil was encountered in three separate Antelope-1 drill stem tests (DSTs)."
 "That said, the company encountered difficulty when testing this lower section in Antelope-1 given the tight nature,  limited porosity,  of the rock within that particular interval," it said.

"In other words, the company was unable to obtain a clear picture of the heavy condensate levels (let alone the oil leg) at the base of the reservoir."

But this time round, according to Raymond James, InterOil's drill pit was getting deeper into better porosity levels throughout its drilling at Antelope-2. "Furthermore, the presence of dolomite throughout the entire upper reservoir section bodes well for the porosity levels in the lower, liquids-rich zone. Bottom line, we will have to wait and see, but the signs thus far have been positive," it said.

"We readily acknowledge that the confirmation of a commercial oil leg could lead to meaningful upstream earnings in the relatively near term versus the extensive timeline set forth for the proposed LNG facility - with first production not expected until at least late 2014. On the other hand, there are obvious execution risks in a 'well watching story,' as exhibited by the sell-off over the past two weeks."

" While recognizing the longer-term valuation upside, we believe it remains essential for investors to recognize that the operational and timing risks as the upstream assets and the LNG plant are developed over the next five-plus years have not disappeared. We maintain our Market Perform rating," it said.

Xstrata, Highlands Pacific upgrade Frieda River

COPPER, gold and silver resources have been upped at the Frieda River project, an Xstrata Copper and Highlands Pacific joint venture in  East Sepik province. (Pictured above is the base camp at Frieda River project).

The Horse-Ivaal-Trukai deposit has been increased by 26 percent, with 40 percent of that now being in the measured and indicated category reports PNG Industry news.

The deposit contains 1060 million tonnes of copper at 0.53 percent copper, 0.29 grams per tonne gold, and 0.8gpt silver at a copper cut-off grade of 0.3 percent copper on a 100 percent-ownership basis.
An exploration licence covers the resource - over an area of 150.6 square kilometers.

Measured resources were reported for the first time and are 30Mt at 0.6 percent copper, 0.32gpt gold and 0.7gpt silver.

Xstrata has a 76.3 percent equity stake in the Frieda River venture through a subsidiary, Xstrata Copper Frieda River, while Highlands Pacific's subsidiary Highlands Frieda holds 16.95 percent and OMRD Frieda holds 6.75 percent.

Xstrata Copper general manager project evaluation Peter Forrestal said results confirmed Frieda River had the potential to be a significant copper-gold producer in the Asia-Pacific region.

He said the company was committed to moving the project forward in partnership with its joint venture partners and was focused on conducting technical studies to complete a pre-feasibility study by the end of the third quarter, 2010.

Highlands Pacific managing director John Gooding said Frieda had the district and depth potential for many decades of production.

"The Frieda copper-gold project is shaping up as a one of the largest open pit Greenfield copper projects in the world," he said.

The deposit's indicated resources sit at 390Mt containing 0.57 percent copper, 0.33gpt gold, and 0.8gpt silver.

Inferred resources are 640Mt at 0.51 copper, 0.26gpt gold, and 0.8gpt silver.
Highlands Pacific was up 1c to at 37c by early afternoon.

Santos PNG gas investment to boost earnings

Santos expects to earn more from its PNG gas venture

AUSTRALIA's oil and Gas Company and third major partner in the ExxonMobil led PNG LNG project Santos Ltd said recently its PNG investment in gas commercialization will transform its earnings come 2014.

Despite reporting an increase in production for the fourth quarter of 2009 compared to the previous year, its overall revenue dropped by 21 percent, hurt by lower oil prices.

In its report to the stock markets the chief executive officer Mr Dick Knox said it was pinning its hopes on PNG lift the company's earnings when production starts.

"The approval of PNG LNG in the quarter was a significant step forward in the company's growth strategy. PNG LNG alone will transform Santos' earnings quality when it comes on line in 2014," said Mr Knox

The company's production for the fourth quarter was 13.9 mmboe or million barrels of oil equivalent, up 2 percent from the prior-year period and flat with the preceding third quarter. Revenue for the quarter was A$600 million (K1.6 billion), down 7 percent from the year-ago period and up 8 percent from the previous quarter.

Santos' average realized price during the fourth quarter was A$85.37 (K226.44) per barrel, down 5 percent  from the same period last year. The company noted that gas production from the Oyong Phase 2 project in Indonesia commenced during the fourth quarter.

Total capital expenditure for the quarter was A$413m (K1.09b), down from A$528.6m (K1.4b) a year ago.

The company said that its production for 2009 was flat with the prior year at 54.4 mmobe, and within the company's guidance range of 53 mmboe-56 mmboe. However, revenue of A$2.18 billion (K5.78b) was 21 percent lower than last year, primarily due to lower international oil prices.

Santos said that its production cost guidance for 2009 was reduced due to cost efficiencies realized in the fourth quarter combined with favorable foreign exchange impacts on US$ denominated production costs. Royalty related taxation expense guidance was reduced, primarily due to actual realized oil prices during the fourth quarter being lower than assumed in previous guidance.

PIFS trade advisor position queried

QUESTIONS have now been raised about the conduct of the Pacific Islands Forum Secretariat (PIFS) in implementing decisions made by Forum ministerial meetings.

As PACNEWS reports one of those decisions was the endorsement by Forum Trade Ministers of the appointment of a new Chief Trade Advisor (CTA) to assist Forum Island Countries in the negotiations of PACER Plus with Australia and New Zealand.

In October 2009, the Secretary General of the Pacific Islands Forum Secretariat, Tuiloma Neroni Slade assured regional trade ministers that his office would expedite the appointment of New Zealand academic and trade expert, Dr Chris Noonan as CTA. He was to join a special unit within the Secretariat initially before taking up his appointment in Vanuatu.

Three months later, Dr Noonan's appointment is still not formalised.
He told PACNEWS from his Auckland office that "arrangements proposed by PIFS for OCTA and his employment as CTA are not satisfactory for me personally and for Forum Island Countries."

"I believe if I accepted the proposed changes, it would not make the office of OCTA independent as mandated by Forum Trade Ministers in October last year.

Dr Noonan said while negotiations on his contract are still continuing, he's concerned with the proposed time frame for PACER Plus negotiations to begin in February.

"Judging by the contract they are offering me, my role and the Office of the Chief Trade Advisor will not be independent. There is no guarantee that the OCTA will be able to provide independent advice nor able to get staff and other resources required in time to perform its functions.

"But the CTA and OCTA will be under the direct control of the Director Economic Governance of the Forum Secretariat.

"If I am appointed, I will need to recruit technical advisors and consult and strategise with FICs on negotiating positions. We will not be able to do that in the short time we have, said Dr Noonan.

Responding to concerns raised by Dr Noonan, former PIFS Director of Economic Governance, Dr Roman Grynberg questioned what he calls 'attempts by the Forum Secretariat to block the development of an independent office of OCTA.'

'How long will it be before the Pacific Island ministers and leaders finally realise that the Forum Secretariat, under the current executive and management team, is not there to serve them but to give them advice that Canberra and Wellington want? Rather than the body that once helped the islands the Secretariat is now simply another instrument of Australian and New Zealand power in the region, Dr Grynberg claims.

He went on to say that 'It is better to have no CTA than a CTA which has no voice and legitimacy and can be dismissed at any time that he upsets the Australian and New Zealand trade negotiations. All this will do is give a fig leaf of legitimacy to the PACER + negotiations rather than give the islands a real voice.'

Dr Grynberg, who was employed by the Forum Secretariat until March last year said the concept of the OCTA was developed during his tenure to help the islands because 'we did not believe that the Secretariat would represent the island's interests and would always bend to Australia and New Zealand's demands.'

"Now rather than have an independent adviser the contract Professor Noonan has been offered says he can be removed in five days and is directly answerable to Dr Bowman a former AusAID trade official, and now

Director of Economic Governance at the Forum, Dr Grynberg said.'
He urged leaders of the Melanesian Spearhead Group (MSG) to 'remove this very important post from the Forum Secretariat and have Dr Noonan transferred to the MSG.'

"I also call on the European Union, which has removed funding for this post at the Forum to provide this to the MSG which is at the moment the only independent voice the islands have, Dr Grynberg said.
Comments have been sought from the Pacific Islands Forum Media officer, Johnson Honimae..PNS