Allied Gold plans growth in Papua New Guinea

Vancouver – Allied Gold (ALG-T, ALD-A) has big plans for its Simberi gold mine in Papua New Guinea: the company has embarked on an expansion of the mine’s oxide processing unit and now a prefeasibility study has shown that the mine could economically add a sulphide circuit to double its gold output.

Allied gold put Simberi into production in early 2008 and the oxide-only operation has been producing 72,000 oz. of gold annually since. Each year the operation churns through 2 million tonnes of ore carrying an average grade of just over 1 gram gold per tonne. In the last quarter it cost Allied Gold US$660 to produce an ounce of gold at Simberi.

In mid-September the company kicked off a US$32-million expansion at Simberi intended to increase annual oxide throughput to 3.5 million tonnes. Once complete, the expansion will enable the mine to produce 100,000 oz. gold each year.

But Allied Gold wants to produce even more gold at the operation and to that end has been investigating the potential to process Simberi’s sulphide ore as well. Now a prefeasibility study has given the sulphide component a pretax net present value of A$334 million, using a 10% discount, and predicts the operation could produce an ounce of gold for US$542 per oz.

The study looked at processing 1.5 million tonnes of sulphide ore each year, to recover a total of 1.9 million oz. gold over a 15-year mine life. The sulphide operation would generate an 18% pretax internal rate of return.

To build the sulphide operation is expected to cost A$246 million.

Now Allied Gold says it will complete a feasibility study on the sulphide operation, but the next assessment will look at a larger facility, capable of processing 2.5 million tonnes of ore and producing 100,000 oz. gold annually.

The sulphide operation would comprise a flotation plant and a mineral roaster, with the latter component necessary to recover gold from a pyritic flotation concentrate. The roaster produces calcine, which would then be subjected to conventional leaching to recover the gold. Overall gold recovery is expected to average 82%.

The defined sulphide resource at Simberi sits primarily within two deposits known as Pigiput and Pigibo, with a small portion contained in a third deposit called Samat. Sulphide reserves stand at 15.1 million proven and probable tonnes grading 2.31 grams gold.

Allied Gold says there are also sulphide zones underlying two other deposits at Simberi, called Sorowar and Botlu, but they both require additional exploration in order to define reserves. The company plans to carry out sulphide drilling at Sorowar in 2011, in part because plans call for using the exhausted pit as a repository for acid-generating mine waste and so the company needs to know soon whether there is more ore at depth.

Allied Gold plans to complete the Simberi sulphide feasibility study by early 2012, in time to get the mill into production by late 2014. The company is also building a mine in the Solomon Islands – the US$135-million Gold Ridge mine should be in production by March 2011 and is expected to produce 120,000 oz. gold annually.

If Gold Ridge, the Simberi oxide expansion, and the Simberi sulphide circuit all come on line according to plan Allied Gold will be producing 320,000 oz. gold each year by 2015.

Allied Gold’s share price lost a penny on news of the sulphide prefeasibility study to close at 54¢, two cents below its 52-week high. Earlier in the year its shares were worth 24¢. The company has 1.04 billion shares outstanding.