PNG EXPECTS $3 BILLION WINDFALL FROM MINE

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Lihir gold mine to triple production

By Mackhenly Kaiok

PORT MORESBY, Papua New Guinea (PNG Post-Courier, Aug. 25, 2008) - Papua New Guinea’s economy will be boosted with an additional PGK8.8 billion [US$3 billion] over the next four years when a major plant expansion at Lihir gold mine is completed.

About 1,000 new jobs and hundreds of spin off businesses are set to be created from the plant expansion project

Landowner royalties and government taxes are also expected to double when the million ounce plant upgrade is completed.

The upgrading work will increase current annual gold production of 200,000 to 300,000 ounces to one million ounces per year from 2011.

Lihir Gold Limited chief executive officer Arthur Hood said last Friday the plant upgrade was set to spiral the country’s economy to a new level.

He said the upgrade would also enable Lihir Gold to expand the processing of gold ore efficiently with lower costs of production.

"Because we will be processing the gold ore more efficiently, we will actually recover a million ounces of gold on our reserves," Mr. Hood said.

"So that means a million more ounces on which we will pay royalties, which will go to the local community, it’s a million more ounces on which we will pay taxes which will go to the government."

"Because our cost of operation will decrease, we will pay more taxes to the Government and because we can process the gold more efficiently, it will add to reserves. As a consequence, there will be no reduction to the life of the Lihirian operation," he said.

Lihir’s gold production fell by 9,000 ounces during the first half year of its 2008 operation. Asked if production is set to increase to recoup that loss, Hood said, "We will pick that up by increasing throughput".

"The Lihir mine will operate a little bit more efficiently over the rest of the year and that will make up that 9000 ounce shortfall," he added.

"This is the largest capital project happening in the PNG gold sector. This is the second or third largest investment project in PNG apart from the LNG Gas project," Hood said.

The upgrade will involve the installation of one additional autoclave which will double the capacity of each of the three existing autoclaves, as well as additional crushing, grinding, thickening, oxygen, and leach plant facilities. Grinding capacity of the plant will increase from around 6 million tons per year to about 12 million tons per year.

Gold production will increase on average by 240,000 ounces per year over the remaining 20 years of the world class mine.

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