Allied sticks to its task By Richard Roberts, 26 November 2007
INNOVATIVE and purposeful but most importantly on time. Nearly. Considering the logistics and supply hurdles Allied Gold faced bringing the Simberi gold project on line in the timeframe it set itself, the company has done remarkably well to be closing in on its first gold pour and a final cap-ex number about 10% higher than that budgeted.
Allied directors were this week still confident of producing first gold from the new 2.2 million tonnes per annum carbon-in-leach plant on Simberi Island, Papua New Guinea, before the end of December. The company started project infrastructure construction in August last year and work on the process plant in November 2006. Plant commissioning was due to start this week. Executive director and chief operating officer Grant Brock told HighGrade the project would cost $A87 million, compared with the budgeted $A80 million.
Allied will go into a $A6-7 million exploration drilling program next year, and a more detailed study on a $A35-40 million expansion of its oxide-ore treatment plant to 3.2 million tonnes per annum – lifting gold output from 84,000ozpa to about 135,000ozpa – having established about as high a degree of self-sufficiency as one could expect of a junior company working on a remote island off the coast of the New Ireland province of PNG, in the Pacific Ocean. The inbuilt support system includes an airstrip, port, seaside accommodation village, 6MW power supply, fresh water supply, a road around the island, the mining and processing infrastructure, an exploration drill rig fleet and now an assay laboratory. The company even bought its own multi-purpose barge to overcome a local shipping bottleneck.
“Unfortunately you’ve probably got to spend more on the infrastructure than you would like to, but if you want to have a reliable operation you really have no choice in that part of the world,� Brock said.
While Allied will have done well to make the transition from explorer to producer without falling into some of the seemingly deepening cost potholes hurting new projects, it won’t dodge higher operating costs with Brock indicating to HighGrade Simberi’s projected cash operating costs had risen from less than $US310/oz to “between $US350-400/oz� due mainly to exchange rate movement. He couldn’t say what impact the capacity expansion would have on operating costs.
Allied has current reserves and resources of 17.7Mt grading 1.37gpt, for 785,000oz, on Simberi, and extensive exploration prospects on the neighbouring Tatau, Mapua and (Big) Tabar islands. Kennecott and Niugini Mining started to get serious about exploration on the islands in the early 1990s, but Allied’s more recent surveying activity has identified numerous untested targets outside the main ones on Simberi the company inherited when it acquired Nord Pacific in 2003. It expects to get its 1Moz of oxide reserves by drilling around and infill drilling known deposits, principally the main Sorowar deposit in north-east Simberi.
Allied also plans to chase strong sulphide gold and silver intersections recorded by Kennecott and so far (reluctantly) ignored by the company’s general manager exploration Bob Burban due to the focus on the oxide development platform. Burban said at this week’s Allied annual general meeting in Perth, Western Australia, the purchase of four drill rigs – two core and two RC – was already speeding up drilling activity and was “critical� at a time of low rig availability in the industry around the world. The rigs could be used to drill about 30,000m of core holes and 33,000m of RC in 2008.
Asked about the availability of drill operators, Brock said it was “not too bad�.
“We’ve got a pretty good crew there,� he said.
“The [assay] laboratory is going to give us the answers more quickly, and we can change things to do it better or quicker for a much more efficient exploration and drilling program.�
Brock said some shipping and equipment delivery delays accounted for most of the two-month schedule overrun. He was particularly pleased with the quality of steelwork fabrication in Indonesia, and he predicted delays with plant deliveries would only get worse in the industry “now the sources of second-hand things have dried up too�.
Allied will source initial feed for the plant from the higher-grade Samat mine south-west of the main camp, and due south of Sorowar, trucking ore to the facility via an all-weather road. It expects its 2.7km-long, 4Mtpa rope conveyor system, being supplied and installed by Austrian company Doppelmayr, to be ready to transport ore from Sorowar to the plant by May next year.
Brock said he had no concerns about the unconventional mine conveyor system, which was being used at a Jamaican bauxite operation and was similar to ski chairlift versions Doppelmayr had installed around the world. The rope conveyor has a 600mm-wide conveyor belt with a side curtain, wheels and axles, riding on cables anchored to large concrete blocks at either end. The suspended cable crosses ridges supported by towers.
Asked about the back-up plan if the rope conveyor didn’t work, Brock said: “They’re called trucks. The risk of the rope conveyor not working is minimal.�
ALD Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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