lhg report mixed report, production up, costs unchanged, selling...

lhg report mixed report, production up, costs unchanged, selling into hedges - about 1 mil oz to clear.

no reaction from market as yet - l guess about expectation. strong rise in POG - if it breaks $610 we are in business

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Lihir Gold Limited (LHG) today said it expected final quarter production to be in the range of approximately 205,000 to 215,000 ounces. The Papua New Guinea-based gold miner has also posted third quarter gold production of 127,000 oz, down 34% on the same quarter in the prior year.



Total cash costs for the quarter under review totalled US$361 per ounce, up 66% on the comparable quarter in 2005, but down 3% on the second quarter in 2006.

Lihir managing director Arthur Hood today said material movements in the third quarter were at an all time record, at 15 million tonnes.

He added that rRevenues of US$49 million were recorded for the three months to September.

“The average cash price received during the quarter was $463 an ounce, including 55,622 ounces sold at an average spot price of US$617, and 62,500 ounces delivered into hedges at $325 an ounce,” he said.

In a statement, the miner said forward gold commitments at the end of September had been reduced to 1.55 million ounces, including the 480,000 ounces gold loan.

This was equivalent to less than 4% of resources and 8% of reserves, Lihir said.

The current delivery schedule should see the total forward commitments reduce to less than 1 million ounces during 2008, the company added.

Mr Hood said increased material movements and rising oil prices led to rising costs in the quarter, despite continued rigorous cost control.

However, he said machinery availabilities improved sharply across the board following improvements to maintenance operations.

The availability of 785 Caterpillar trucks increased to more than 84% in September, from 72% in the first half of the year. Mill throughput, at 1.1 million tonnes, was up 26% from the June quarter, he added.

“These key operating parameters confirm that steady progress is being made in reshaping the organisation, improving efficiency and productivity,” Mr Hood said.

As previously advised, Mr Hood said Lihir was undertaking studies to identify avenues to lift annual production to beyond 1 million ounces.

“This analysis is expected to be completed by the end of the year, and is likely to proceed to a full feasibility study being conducted in 2007,” Mr Hood advised.

Looking forward, he said aggregate gross cash costs are expected to remain fairly stable in the final quarter.

“The combination of increased production and steady costs should see unit costs fall sharply in the final quarter, to approximately US$320 an ounce,” Mr Hood concluded.

Earlier this month, Lihir Gold and Ballarat Goldfields NL (BGF) proposed a plan to merge and create a major Asia-Pacific gold producer.

With the offer valuing Ballarat at $350 million, the companies said the merged firm was expected to achieve annual gold production of more than 900,000 ounces in 2008.

At 1024 AEST, shares in Lihir were unchanged at $2.83.