Allied to develop PNG gold project

ON the back of a higher gold price, Perth gold junior Allied Gold will become Papua New Guinea’s newest gold producer, announcing plans to develop the $37.9 million Simberi gold project. Based on a gold price of $US440 an ounce and an Aust-ralian dollar worth 77 US cents, the Simberi oxide gold project is estimated by Allied’s feasibility study to generate revenues of $US88 million over the life of the life of the mine, expected to last more than nine years. The price of gold broke through $US475 an ounce last month and has drifted between $US460 and $US465 in November. Allied managing director Jeff Moore said the rising gold price had made the decision to go ahead with the mine easier. “It [gold price] certainly has ass-isted us in making the decision, but when we started on the feasibility study in 2003 prices were much lower,” he said. South African resource-focused finance house Rand Merchant Bank (RMB) has been recruited to provide a finance facility of up to $US25 million for development of the Simberi project. RMB is well advanced on due diligence processes, with formal pro-ject financing scheduled to be completed before the end of the year, Mr Moore said. The balance of the project cost will be made up in equity financing, to be determined over the next few weeks, he said. There had also been strong interest from other mining companies in participating in financing the development of the project’s first stage, according to Mr Moore. Listing on the Australian Stock Exchange in December 2003, Allied immediately acquired former Can-adian owner of Simberi, Nord Pacific. A previous bankable feasib-ility study commissioned in 2003 estimated a lower capital cost at the project, but this did not include the current scope of the proposed mine, Mr Moore said. The mining method at the site will be open pit with ore processing on site in a conventional carbon leach cyanide process. The plant would account for a majority of the capital outlay, Mr Moore said, with other sunk costs including an airstrip and expanded camp for the mine workforce, which will consist of both Indigenous and expatriate workers. A more prospective second stage of development at Simberi is also being touted by Allied, with drilling identifying deeper gold sulphide resources. Stage one is forecast to produce about 62,300 ounces of gold a year, Mr Moore said, at an operating cost of $US278 an ounce. At a the feasible gold price, this represents an operating margin of $US162 an ounce, although Mr Moore said this could be reduced through further cost savings in labour, steel and by sourcing second-hand equipment. The Simberi project lies on Simberi Island, in the New Ireland province of PNG, just 60 kilometres from the world-class Lihir gold mine.

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