27th Jul 2006 16:38
Allied Gold Limited27 July 2006 FOR IMMEDIATE RELEASE 27 July 2006 Allied Gold Limited ("Allied" or the "Company") "This press release is not for dissemination in the United States and shall notbe disseminated to United States news services" CAPITAL AND OPERATING BUDGET REVIEWS COMPLETED PROJECT DEVELOPMENT PROCEEDING ON TRACK HIGHLIGHTS • Recovered ounces increased by 107,000 ounces to 693,000 ounces • Ore delivery system by Aerial Rope Conveyor confirmed to significantly enhance operating efficiency and cost • Optimised average throughput increased to 2.2 Mtpa resulting in 38% increase in average annual production to 84,000 oz • Estimated operating cash surplus increased to US$139 million • Company remains fully funded for Project Development • Targeted first gold production third quarter 2007 Allied Gold Limited ("Allied") is pleased to announce that in conjunction withits design EPCM Engineer Intermet Engineering Limited ("Intermet") an updatedCapital and Operating cost estimate for the Simberi Oxide Gold Project has nowbeen completed. Key project fundamentals based on US$550/oz gold price and exchange rate A$1 =US$0.75 are; Life of mine - 8.2 years • Average annual mining rate - 2.2 Mtpa at 1.37 g/t gold • Annual gold production - 84,000 oz • Estimated operating cash cost - US$306 per oz • Estimated capital cost - US$60 million (including contingency) Indicative financial analysis (using gold price inputs of US$550 and US$600); US$550 US$600 • NPV (discount rate 8%) - US$58 million US$82 million • IRR - 29% 36% • Operating cash surplus - US$139 million US$163 million Project financial analysis is based on open pit optimistations using gold priceinputs of US$350 to US$550 per ounce and is prepared on a pre-tax, ungeared andunhedged basis. The project economics are expected to be further enhanced bythe use of debt financing and the implementation of a flat forward gold hedgingprogram. DISCUSSION OF RESULTS Project Development Summary The Simberi Gold Project is located in the New Ireland Province of eastern PapuaNew Guinea, approximately 60kms north-west of the Lihir Gold Mine. The Simberi Oxide Gold Project is at Stage 1 open-pit mining project which willextract ore from seven deposits which represent the known surface andnear-surface oxidised caps to underlying sulphide gold mineralisation on easternSimberi Island. The ore will initially be trucked and delivered by an aerialrope conveyor to a conventional carbon in leach processing facility. A recent review and optimisation of project capital, construction, owners andpre production costs as well as operating costs has been carried out andconcluded by Allied Gold Limited and Intermet Engineering. The review and optimisation resulted in an increase in project capitalconstruction and owners and pre production costs from US$43.7 million to US$60million. Cost and capacity pressures continued to effect project developments inthe mining resource sector. Tight labour markets and shortages of equipment andsupplies have driven up costs and in some instances impacted project schedules.The increased capital costs are symptomatic of the current market conditions andare beyond the control of the company. The increase in average cash operatingcost of US$306 /ounce are a direct result of increased fuel, chemical reagentand labour costs. The Board is confident that irrespective of the increases in capital andoperating costs the project economics are sound and deliver the necessaryreturns on investment. Notwithstanding, the increase in the project development capital cost, anincrease of up to 10% has been achieved in plant throughput. This has resultedin an optimised 2.2 Mtpa plant throughput from a name plate capacity plant of 2Mtpa. Allowances in the plant design will enable potential future increasesabove the name plate capacity. The ore delivery system from the Sorowar pit will be undertaken utilising anaerial rope conveyor supplied by Doppelmayr of Austria, with a design capacityof 3.9 Mtpa. Infrastructure works including camp and earthworks associated withroads, airstrip and wharf have continued. In conjunction with this, design andpreparatory work have continued to the point where major commitments have beenmade and will follow over the coming weeks. • Plant Intermet Engineering have continued the plant design that is now 22% completeand the plant layout and process flow sheet has been finalised. This has allowedprocurement to commence and in this regard: • the ball mill has been purchased and refurbishment is underway • the steel fabrication contractor commitment has been awarded • LV motor, reclaim feeder, sizer crusher supply orders have been placed • the power station supply order was placed in June • overland rope conveyor order is under final contract review • the majority long lead time items have been identified and are being sourced • finalisation of the process design flow chart • Ore Transportation The ore delivery system from the Sorowar pit will be undertaken utilising anaerial rope conveyor supplied by Doppelmayr of Austria, with a capacity of 3.9Mtpa. Survey has been carried out to progress and optimise a rope conveyorsystem. Negotiations were undertaken last week and an order is anticipated inthe next week. The rope conveyor is 2.7 km long, travels at 3.3 m/s and has acapacity to deliver 3.9 Mtpa. The rope conveyor is state of the art design andconfirms all weather delivery of ore from the Sorowar ROM direct to the plant.At the same time it provides environmental benefits over other means oftransport by way of reduced clearing (compared to road or slurry transportation)and generating power that is used to supplement the plant. In addition theaerial rope conveyor offers significant operating and maintenance cost benefits. • Support Infrastructure Project support infrastructure commenced in April and is continuing to allowcommencement of the main construction works later this year in the finalquarter. Infrastructure under construction include: • 125 man temporary/permanent camp construction commenced in June andwill be completed by August/September • island runway upgrade for Dash 8 size aircraft underway that will becompleted in August • wharf construction and design has commenced under a Design & Constructarrangement with a local PNG contractor • Deep Sea Tailings Disposal design has commenced and the associatedbathymetric survey is on the point of being committed • additional earth moving equipment mobilised to site to facilitatecompletion of site access roads and commencement of plant site earth works • Financing RMB Resources Limited ("Rand") was mandated to arrange a finance facility of upto US$25 million (if required). On the 10th April, 2006 Allied Gold Limitedagreed and accepted the terms of a Credit Approved Project Finance Facility forthe Simberi Oxide Gold Project. The facility is for loan funds of up to US$25 million plus a hedging facility ofup to 250,000 ozs. The mandatory hedging component is approximately 150,000 ozswhich represents 20% of the project mineable reserves and resources. The term ofthe loan is until 31 December 2011. The company and RMB Resources Limited willnow together work through the remaining conditions precedent including fulldocumentation. In conjunction with current cash reserves and additionalfinancing options for project plant and machinery, the project remains fullyfunded. For enquiries in connection with this release please contact: Mark V Caruso Managing Director Allied Gold Limited +61 8 9353 3638 phone +61 8 9353 4894 fax [email protected] e-mail Roland Cornish Beaumont Cornish, Nominated Adviser 0207 628 3396 Telephone The information in this Stock Exchange Announcement that relates to results fromthe Studies "Capital Cost Estimate 2.0 Mtpa and Process Commentary" and "CapitalCost Estimate for a Ropecon Conveyor System", has been approved for release byMr G Thomas of Intermet Engineering Pty Ltd. Mr Thomas consents to the inclusion of the information contained in this ASXrelease in the form and context in which it appears. The information in this Stock Exchange Announcement that relates to projectfinancial modelling, mining, exploration and metallurgical results, togetherwith any related assessments and interpretations, has been approved for releaseby Mr. R. Hastings, MSc, BSc., M.Aus.I.M.M., a qualified geologist and full-timeemployee of the Company. Mr Hastings has sufficient experience which isrelevant to the style of mineralisation and type of deposit under considerationand to the activity which he is undertaking to qualify as a Competent Person asdefined in the 2004 Edition of the "Australasian Code for Reporting ofExploration Results, Mineral Resources and Ore Reserves". The information in this Stock Exchange Announcement that relates to ore reserveshas been compiled by Mr Mike Apfel of Gemcom Australia who is a Member of theAustralasian Institute of Mining and Metallurgy. Mr Apfel has had sufficientexperience in Ore Reserve estimation relevant to the style of mineralisation andtype of deposit under consideration to qualify as a Competent Person as definedin the 2004 Edition of the "Australasian Code for Reporting of ExplorationResults, Mineral Resources and Ore Reserves". Mr Apfel consents to the inclusion of the information contained in this ASXrelease in the form and context in which it appears. Forward-Looking Statements. This press release contains forward-looking statements concerning the projectsowned by Allied. Statements concerning mineral reserves and resources may alsobe deemed to be forward-looking statements in that they involve estimates, basedon certain assumptions, of the mineralisation that will be found if and when adeposit is developed and mined. Forward-looking statements are not statementsof historical fact, and actual events or results may differ materially fromthose described in the forward-looking statements, as the result of a variety ofrisks, uncertainties and other factors, involved in the mining industrygenerally and the particular properties in which Allied has an interest, such asfluctuation in gold prices; uncertainties involved in interpreting drillingresults and other tests; the uncertainty of financial projections and costestimates; the possibility of cost overruns, accidents, strikes, delays andother problems in development projects, the uncertain availability of financingand uncertainties as to terms of any financings completed; uncertaintiesrelating to environmental risks and government approvals, and possible politicalinstability or changes in government policy in jurisdictions in which propertiesare located. Forward-looking statements are based on management's beliefs, opinions andestimates as of the date they are made, and no obligation is assumed to updateforward-looking statements if these beliefs, opinions or estimates should changeor to reflect other future developments. Not an offer of securities or solicitation of a proxy. This communication is not a solicitation of a proxy from any security holder ofAllied, nor is this communication an offer to purchase nor a solicitation tosell securities. Any offer will be made only through an information circular orproxy statement or similar document. Investors and security holders arestrongly advised to read such document regarding the proposed businesscombination referred to in this communication, if and when such document isfiled and becomes available, because it will contain important information. Anysuch document would be filed by Allied with the Australian Securities andInvestments Commission, the Australian Stock Exchange and with the U.S.Securities and Exchange Commission (SEC). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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