Lihir, Papua New Guinea

The Lihir gold mine is on the island of Lihir, in Papua New Guinea's (PNG) New Ireland Province, about 700km north east of Port Moresby. The principal asset of Lihir Gold Ltd, the mine was managed by a subsidiary of Rio Tinto until late 2005, since when it has been operated directly by Lihir Gold.

Lihir Gold announced in February 2008 that it would proceed with a major upgrade to the mine, lifting gold production by an average of 240,000oz per year over the life of the operation. This equates to a lift in output over the period from 2011 to 2021 of 2.35Moz to over 10Moz.

The company also announced that it was investing $696m to improve operational efficiencies, and that it expected to see a reduction in production costs of $80 per ounce.

The upgrade, approved by the Board of Directors, has been the subject of a rigorous 12-month feasibility study which concluded that it would provide a robust return, positioning LGL for increased output, lower cash costs and more reliable and consistent production.

Currently around 1Moz is mined from Lihir each year. The company says that the upgrade will allow it to bring its current annual processing levels of 600,000 to 700,000oz per year more into line with this figure.

GEOLOGY AND RESERVES

Lihir Island consists of five miocene-pleistocene volcanic units, of which three are volcanic calderas and two are sequences of mafic volcanic rock that predate the three volcanoes. Remnant geothermal activity is present in the Luise caldera, evidenced by hot springs and fumeroles.

The orebody is contained in a hydrothermally-altered porphyry gold system with the gold hosted in volcanics, intrusives and breccias within the caldera. The majority of the gold is contained in sulphides.

Currently defined gold mineralisation occurs near the centre of the caldera. Exploration since 1983 has defined several adjacent and partly overlapping deposits; Lienetz, Minifie, Coastal and Kapit with adjacent satellite deposits of Borefields and Camp. The bulk of the known mineralisation is in Minifie and Lienetz. All of the deposits except Minifie are connected by areas of low-grade mineralisation.

End-2004 proven and probable reserves were 188Mt grading 3.48g/t gold, giving a total gold content of 21Moz. Recent re-evaluation of the reserve in the light of higher gold prices has resulted in an increase to 23.6Moz, despite the production of 1.25Moz in the intervening period.

MINING

Lihir is an open-pit mine consisting of two adjacent overlapping pits. With the current reserve, mining will take place for 13 years, during which the higher grade ore will be fed directly for processing and lower grade ore will be stockpiled. This will be processed during the following 17 years, giving a total projected life of 30 years. Most of the ore contains refractory sulphides requiring oxidation before cyanide leaching.

Hydrothermal activity and a high water table create a major water problem and the water table is lowered by borehole pumping. The mine produced 7.95Mt of ore in 2006, plus 48.2Mt of waste rock, with the mining rate having been increased in order to compensate for lower ore grades.

The mining fleet now consists of five O&K RH-200 face shovels and 33 Caterpillar 785B haul trucks. From 1996 to 2000, Lihir's mining was carried out under contract by the Thiess-Roche joint venture; from April 2000, Lihir Gold took over mining operations itself. Recent work has involved sequential mining of the Lienetz orebody, which will form the focus of production until 2010.

ORE PROCESSING

The proposed upgrade will involve the installation of one additional autoclave of twice the capacity of each of the three existing autoclaves, as well as additional crushing, grinding, thickening, oxygen, and leach plant facilities.

The expansion will increase the grinding capacity of the plant from around 6.5–7Mt/a, to approximately 10.5–12Mt/a, increasing annual gold output by between 200,000oz and 300,000oz.

Average incremental production of approximately 240,000oz per annum is expected over the remaining 20+ year life of the operation. This is to be achieved in two ways:

1. By maximising direct feed ore to the autoclaves, the proportion of ore fed through the flotation circuit is reduced, thereby increasing gold recoveries and consequently total gold production.

2. By accelerating processing rates, bringing forward production and maximising value.

The Lihir processing facility at Putput treats sulphide and oxide ore. A flotation circuit for sulphide ore recovery was commissioned in 2000 and was expanded during 2006, giving a plant capacity of over 6Mt/y of ore and an output capacity of 800,000oz/y of gold.

PRODUCTION

In 2006, Lihir treated 4.3Mt of ore at an average grade of 5.14g/t gold, producing 650,811oz of gold. Total material movement was 56.2Mt, a record. The target for 2007 was to move over 60Mt of ore and waste, with an output of over 800,000oz. As in previous years, low-grade ore was stockpiled for future treatment.

The previous operating model had involved mining approximately 10–12Mt of ore per year (containing more than 1Moz of gold), of which some 4–5Mt of higher grade ore has been processed.

The remaining lower grade ore was stockpiled for processing in the years following the planned completion of mining in 2021. Under the current mine plan, stockpiles were forecast to peak at 137Mt in 2021, containing some 9Moz of gold.

The plant expansion will enable more of the mined ore to be processed and monetised, reducing rehandling, bringing forward production from future years and lifting net present value. No additional mining will be required, and the stockpile peak will reduce by approximately 40Mt.

A further important benefit is that increased plant throughputs will alleviate pressures to selectively mine and feed higher grade ore, improving operational consistency and reducing sensitivities to short term variations in ore gold grade. Furthermore, duplication of key elements in the processing chain will create operational flexibility, adding redundancy and delivering increased plant utilisation. These benefits have not been quantified in the feasibility study.