Published in the April 2011 PNG Report magazine

Frieda River

Xstrata Copper recently unveiled an updated resource for its massive Frieda River copper-gold joint venture in Papua New Guinea, with contained copper jumping 50%.

Highlands Pacific owns 18.18% of the project.

The resource for the Horse-Ivaal-Trukai deposit, based on 34,000 metres of diamond drilling completed last year, increased to 1.9 billion tonnes grading 0.45% copper, 0.22 grams per tonne gold and 0.7gpt silver, using a cut-off grade of 0.2% copper, for 8.6 million tonnes of contained copper metal and 14.3 million ounces of contained gold.

The previous resource contained 8.1Mt of contained copper and 13.3Moz of contained gold, an increase of 52%.

In the measured and indicated categories, contained copper is up 125%. Measured and indicated resources now comprise 58% of the overall resource for the project.

The Frieda River prefeasibility study released in November gave the project capital costs of $US5.3 billion ($A5.2 billion) for a 20-year operation.

The open pit project is expected to produce 930,000t per annum of concentrate containing 246,000t copper and 379,000oz of gold in the first eight years of its life at C1 cash operating costs of 43c per pound or $1.12/lb without gold credits.

After the first eight years, the throughput rate will be 50Mtpa to produce 190,000tpa copper and 284,000ozpa gold at cash costs of 58c/lb copper, generating $612 million of free cash flow per annum.

Xstrata assumed control of the project in January 2007 and must complete the feasibility study by January 2012 to maintain its 81.82% interest.

Highlands Pacific is free carried to the completion of the study.

The feasibility study is due to be completed in the first quarter of next year and the joint venture partners are targeting first production in 2017 after a four-year construction period.

Lihir

Lihir

In August 2010, shareholders in takeover target Lihir Gold backed the company's $9.5 billion merger with Newcrest Mining.

Newcrest, capped at more than $28 billion earlier this year, was the leading gold producer in the Asia-Pacific region and fifth-largest in the world.

The prize in the Lihir takeover was the namesake gold mine in PNG.

The merger had a huge impact on Newcrest's most recent half-year results, posting an underlying profit of $A523.1 million and production of close to 1.39Moz.

In the first report handed down since it gained control of Lihir, the benefits of the merger were clearly evident, with 75% of extra gold sales reported attributed directly to the Lihir assets.

The world-class Lihir mine in PNG contributed 277,961oz in the four months to the end of December.

Wafi-Golpu

Another Newcrest venture (held 50:50 with Harmony Gold) the massive Wafi-Golpu copper-gold project recently intersected strong drilling grades outside the boundaries of the current resource of 16 million ounces of gold and 4.9 million tonnes of copper.

Drilling intersected 883m grading 2.15% copper and 2.23gpt gold from 913m, including 628m at 2.82% copper and 3.06gpt gold, using a 1% copper cut-off grade.

The hole represents the highest grade intersection at Golpu to date and extends the known mineralisation by a further 70m north.

The deposit remains open at depth and to the north.

In October the JV partners upped the project's exploration target to 30Moz gold and 8Mt copper.

A prefeasibility is underway and will examine a number of mining options, with current resources pointing to a 20-30 million tonnes per annum throughput, producing 300,000-700,000 ounces per annum gold and 200,000-320,000 tonnes per annum copper.

The PFS is due to be completed before the end of the year.

Wafi-Golpu forms part of the Morobe JV, which is a 50:50 partnership between Newcrest and Harmony.

Ok Tedi

The giant Ok Tedi copper-gold mine was scheduled to close in 2013 but further open cut mining and the introduction of underground mining could give the operation another seven years.

The company's Mine Life Extension project is subject to a two-part feasibility study.

The first part will determine the viability of a push-back expansion of the west wall of the open pit.

The second part of the feasibility, scheduled for completion in the middle of this year, covers two proposed underground mining operations to complement the extended open pit.

Development of the Ok Tedi Underground mine is subject to the feasibility results and regulatory approval.

Work for the project goes back several years and the extension was expected to produce 90Mt of ore with 700,000t of copper and 2.3Moz of gold from 2014-20.

Given that the mine produces roughly around 160,000t of copper and 540,000ozpa of gold, Ok Tedi will still be downsized if the extension project goes ahead as anticipated.

Plans have been in place for several years to prepare for the challenges ahead, as the mine is a big contributor to the coffers of the PNG government and other local landholders and communities.

Porgera

Barrick Gold's 95%-owned Porgera underground and open pit mine is located in the Enga Province in the highlands of PNG.

In 2010 Barrick's share of production was 519,000oz at cash costs of $US582/oz. The company's share of proven and probable mineral reserves at the end of 2010 was 7.4Moz.

Simberi

Allied Gold recently boosted resources at the Botlu deposit, part of its Simberi gold mine in Papua New Guinea, by 172%.

The inferred resource for Botlu is now 8.4Mt grading 1.59gpt for 429,000oz, using a 0.5gpt cut-off grade for oxide material and a 1gpt cut-off for transition and sulfide ore.

The new estimate is up from the previous resource of 158,000oz and used data from 165 drillholes for 14,950 metres.

The resource is predominantly sulfide material and the new resource will be used in the ongoing bankable feasibility study on processing the sulfide material at Simberi.

The bankable feasibility study is looking into an increased throughput option from 1.5Mt per annum to 2.5Mtpa, which could see Simberi production jump to 250,000-300,000ozpa.

The BFS is due to be completed by the start of next year, with construction to be completed by the end of 2014.

If the gold price continues to strengthen, Allied may look at accelerating plans.

The current Simberi oxide plant has a nameplate capacity of 2Mtpa to produce 70,000ozpa gold.

The mine produced 64,327oz in the 2010 financial year and 72,609oz in the 2009 financial year.

The project has measured and indicated resources of 80.4Mt at 1.26gpt gold for 3.26Moz, plus inferred resources of 91.9Mt at 1gpt gold for 2.95Moz gold.