Gold production company Allied Gold (LON:ALD) has celebrated the pouring of its 250,000th ounce of gold from the Simberi Gold Mine in Papua New Guinea since commercial production first began in 2008. The milestone occurred shortly after processing was restarted following a maintenance shutdown that is likely to dent the mine’s financial performance for 2011. However, Allied said it was pressing ahead with production changes that would cut the cost per ounce of production by US$50 and that is was on course to significantly expand capacity at its processing plant during the course of next year. Shares in the FTSE 250 company rose by more than 5% to 156p.

Simberi originally began with a modest eight year outlook but is now putting in place expansion and efficiency initiatives for mid-2012 that should see it produce a minimum 100,000 ounces per year (ozpa) over the next ten years from its oxide open pit operations. A sulphide processing circuit could further lift Simberi’s annual production rate to more than 250,000 ozpa from 2015.

Processing at Simberi, which lies 45km from Lihir Island in the New Ireland province of PNG, has recommenced following a shutdown due to repairs to the 2.4 million tonnes per annum (mtpa) ball mill. Due to the three week mill shutdown, Simberi is expected to produce in the December quarter between 12,000 and 14,000 ounces, compared to a steady state run rate of 18,000 ounces a quarter. Full year production from Simberi in 2011 is expected to be approximately 58,000 ounces with expansion and fuel cost saving initiatives aimed at lifting production to approximately 100,000 ozpa and reducing costs to a targeted US$850-US$900/oz to take effect during 2012.

Recently ordered heavy fuel oil generator sets will be delivered and progressively installed during the June quarter of 2012. When fully operational, the switch from diesel generators to heavy fuel oil will reduce Simberi's operating cost by approximately US$50/oz.

The expansion of the Simberi processing plant from 2.4 mtpa to 3.5 mtpa is scheduled for between June and September 2012. A number of key long lead equipment items, such as the SAG mill, are already at site and awaiting fabrication or installation in 2012. The key long lead items awaiting delivery in the June quarter 2012 include the tailings thickener and the ore reclaimer.

Frank Terranova, Allied Gold’s…

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