Updated: Newcrest reopens Lihir, outlines Golpu potential

VANCOUVER — Newcrest Mining (NM-T, NCM-A) has reopened its Lihir gold mine in Papua New Guinea (PNG) after a brief suspension of operations, just as it outlines the potential of Golpu, another major PNG project.

On August 28 the gold miner, Australia’s largest and one of the top five gold producers in the world, announced that operations at its Lihir mine were being impacted by the Lihir Mining Area Landowners Association after the association blockaded the mine on August 26 in a dispute over benefits.

By August 29, however, Newcrest reported that normal operations had restarted and that the processing plant was ramping up. The company stated that a meeting was held with landowners and government representatives and that “the parties have defined a pathway to resolve the causes of the dispute and agreed to work in a renewed spirit of cooperation to conclude the review of the Integrated Benefits Package.”

The blockade comes as the company continues to work through a five yearly review of the mine’s benefits package, which provide a range of social and infrastructure programs as well as direct compensation arrangements to the community. PNG paper The National reports that the landowner representatives were demanding that the benefits package of K2.5 million ($1.16 million) be paid out immediately, and that an interim administration budget of K24 million ($11.16 million) be set up until the benefits package review is completed. Newcrest provided no details on any new agreements reached with the landowners.

Lihir, sitting some 900 km northeast of Port Moresby in New Ireland province, is one of Newcrest’s key properties, producing roughly a quarter of the company’s total gold production last fiscal year. In the year ending June 30 Lihir produced 604,336 oz. of Newcrest’s total production of 2.29 million oz. gold, and at a cash cost of US$339 per oz. gold.

Work to increase the annual capacity of Lihir to roughly a million oz. gold per year has been ongoing since 2008, when Lihir Gold owned the mine. Newcrest acquired Lihir Gold in August 2010 in a US$.9.5 billion takeover, and has continued with the US$1.3-billion upgrade project at Lihir and expects the project completed by the end of 2012.

As of the end of 2011 the Lihir mine hosted proven and probable reserves of 420 million tonnes grading 2.3 grams gold for 31.5 million oz. gold, and a global resource of 880 million tonnes gradin 2 grams gold for 56.6 million oz. gold.

Meanwhile reserves at the company’s 50%-owned Golpu project have increased considerably in a new pre-feasibility study on the project, which Newcrest jointly owns with Harmony Gold (HYM-N).

The project is now estimated to host reserves of 450 million tonnes grading 0.86 gram gold, 1.21% copper, and 1.4 grams silver for 12.4 million oz. gold, 5.4 million tonnes copper and 19.7 million oz. silver, up from 1.3 million oz. gold and 0.8 tonnes copper. Total mineral resources stand at 1 billion tonnes grading 0.63 gram gold,0.90% copper, and 1.1 grams silver for 20.3 million oz. gold, 9 million tonnes copper, and 35.7 million oz. silver.

The mine plan at Golpu calls for underground block cave mining, with production of between 400,000 and 580,000 oz. gold and 300,000 to 400,000 tonnes copper per year for the 26-year mine life.

Initial capital costs to put the mine into production in 2019 total US$4.8 billion, while life of mine capital costs ring in at US$9.8 billion. Operating costs come in at US$22.65 per tonne, while cash costs come in at negative US$1,900 per oz. gold thanks to the copper credits.

Copper recoveries are estimated at 93%, while gold comes in at 61%. The company stated that improving gold recoveries will be a focus during the feasibility study stage, which it expects to start next year.

Before starting the feasibility study however, and especially in light of recent issues at Lihir, Newcrest stated that it will engage key stakeholders including government and landowner representatives to “ensure alignment on the planned project development and key elements of the next phase of work.”

The PNG government has the right to acquire a 30% stake in the Golpu joint venture at cost up until it grants a mining lease.

Work also continues on the nearby Wafi deposit, with Newcrest expecting to start a pre-feasibility study later this year. Wafi currently hosts110 million indicated tonnes grading 1.7 grams gold and 3.6 grams silver for 6.3 million oz. gold and 13 million oz. silver, plus 23 million inferred tonnes grading 1.3 grams gold and 2.5 grams silver.

The Wafi deposit is a gold-silver epithermal deposit comprised of disseminated sulphides and quarts vein stockworks argillic-altered conglomerate, siltstone, and sandstone units.

In contrast, the nearby Golpu deposit is a porphyry-related deposit comprised of stockwork vein arrays and disseminated sulphides hosted in altered diorite porphyry intrusions and surrounding metasedimentary rocks.

The Wafi-Golpu property also hosts the earlier stage Nambonga porphyry deposit, with an inferred resource of 40 million tonnes grading 0.79 gram gold and 0.22% copper.