PNG GOLD MINE HURT BY RISING AUSTRALIAN DOLLAR

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PORT MORESBY, Papua New Guinea (PNG Post-Courier, July 31) - Papua New Guinea’s major gold miner Lihir Gold Limited has become the first company to be hit with pressure associated with the rising Australian dollar against the U.S. dollar.

The Australian newspaper reported yesterday that the miner had become the latest in a long line of resources companies to note the difficulties associated with the rising Australian dollar.

Lihir Gold Mine Limited posted its record first-half production of 375,730 ounces. Lihir Gold chief executive officer Arthur Hood told the Australian newspaper that while unit costs remained stable over the first half of 2007, the rapidly appreciating Australian dollar had led to "significant increases in costs." Production cash costs were steady at AU$282 [PGK712; US$240] an ounce for the three months, while the average cash price per ounce of gold was AU$664 [PGK1,676; US$565].

"It (the higher Australian dollar) has certainly added to our costs this year," Mr. Hood said. "It's a challenge."

The central bank announced last week that it would purchase more kina against the US dollar to keep the Australian dollar at bay with the local currency so that investors with exposure to the Australian dollar would be hardly hit by the rise in the Australian dollar. The Australia and New Zealand (ANZ) Bank reported in its latest issue of the Treasury Update that the kina had continued to remain steady, with no sign of central bank taking it higher. Volumes were moderate until the end of the week when some much-needed US dollar came in from the export sector.

Meanwhile, the Australian dollar had temporarily "come off the boil" and so the pressure to maintain a steady cross rate had lessened somewhat. "With the heavy central bank activity last week, maybe it’s done enough on the topside for the time being," said ANZ Bank.

"Time will tell but don’t be surprised to see further kina appreciation later."

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