1st Aug 2006 17:33
Allied Gold Limited01 August 2006 For Immediate Release 1 August 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." QUARTERLY REPORT FOR THE PERIOD ENDING 30 JUNE 2006 HIGHLIGHTS • Placement of US$10m to international institutional clients of UK based broker, Mirabaud Securities Limited • Optimisation of project capital, construction, owners, pre-production costs and operating costs carried out and concluded • Significant increase in Ore Reserves and Mineral Resources scheduled for mining within designed pits from 666,000 contained ounces to 785,000 contained ounces • Continued encouraging high grade oxide intercepts on Simberi Island at Pigicow and commencement of drilling at Tatau island CAPITAL AND OPERATING BUDGET REVIEWS COMPLETED While falling outside the quarter, the Company on the 28th July 2006 made thefollowing significant announcement regarding capital and operating budgets. TheCompany stated that in conjunction with its design EPCM Engineer, IntermetEngineering Limited ("Intermet") an updated Capital and Operating cost estimatefor the Simberi Oxide Gold Project has now been completed. Key project fundamentals based on US$550/oz gold price and exchange rate A$1 =US$0.75 are; o Life of mine 8.2 years o Average annual mining rate 2.2 Mtpa at 1.37 g/t gold o Annual gold production 84,000 oz o Estimated operating cash cost US$306 per oz o Estimated capital cost US$60 million (including contingency) Indicative Financial Analysis (using gold price inputs of US$550 and US$600); US$550 US$600NPV (discount rate 8%) US$ 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 optimisations 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. 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. Tight labour markets and shortages of equipment and supplies havedriven up costs and in some instances impacted project schedules. The increasedcapital costs are symptomatic of current market conditions and are beyond thecontrol of the Company. The increase in average cash operating cost to US$306per ounce is a direct result of increased fuel, chemical reagent and labourcosts. Furthermore, an increase of up to 10% has been achieved in name plate plantthroughput. This has resulted in an optimised 2.2 Mtpa plant throughput from aname plate capacity plant of 2 Mtpa. Allowances in the plant design will enablepotential future increases above the name plate capacity. OXIDE MINE DEVELOPMENT AND PROJECT CONSTRUCTION The Simberi Oxide Gold Project is a 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. After the initial delivery of ore by trucking for plantcommissioning, ore delivery will be facilitated by an aerial rope conveyor to aconventional carbon in leach processing facility. The project development remains on track with the continued progress ofinfrastructure works including camp and earth works associated with roads,airstrip and wharf. In conjunction with this design and preparatory work havecontinued to the point where major commitments have been made and will followover the coming weeks. Intermet Engineering have continued the plant design work (22% complete) and theplant layout and process flow sheet has been finalised. This has allowedprocurement to commence and in this regard: o The ball mill has been purchased and refurbishment is underway o The steel fabrication contractor commitment has been awarded o LV motor, reclaim feeder, sizer and crusher supply orders have been placed o The power station supply order was placed in June o Aerial rope conveyor order is under final contract review o The majority of long lead time items have been identified and are being sourced o Finalisation of the process design flow chart Project support infrastructure works commenced in April and are ongoing toenable commencement of the main construction phase of project development in thefinal quarter of this year. Infrastructure under construction includes: o 125 man temporary / permanent camp construction which commenced in June and will be completed during August / September o Island runway upgrade for Dash 8 size aircraft will be completed in August o Wharf construction and design has commenced under a Design & Construct arrangement with a local PNG contractor o Deep Sea Tailings Disposal design has commenced and the associated bathymetric survey is at the point of being committed o Additional earth moving equipment mobilised to site to facilitate completion of site access roads and commencement of plant site earth works MINEABLE RESERVES AND MINERAL RESOURCES WITHIN DESIGN PITS Updated pit optimisations and pit designs were recently carried out by GolderAssociates utilising gold price inputs of between USD$350 - USD$550 per ounce.In conjunction with recent drilling undertaken at Sorowar East and West therehad been a significant increase in Ore Reserves and Mineral Resources scheduledfor mining within designed pits from 660,000 contained ounces to 785,000contained ounces. This has resulted in an increase in recovered ounces from585,000 ounces to 692,000 ounces after application of process recoveries. The latest Reserves and in-pit Resources at a gold price of USD$550 per ouncecomprise, 14.87 Mt of proven and Probable Reserves at a grade of 1.41g/t gold,and 2.90Mt of Inferred Resources within Designed Pits at a grade of 1.20g/tgold, for a total of 17.77Mt at 1.37 g/t gold grade. Sorowar Mineral Resource Update Golder Associates updated the Sorowar Deposit Resource model during May 2006,using the April 2006 geological database. The previous Resource model, reportedin the Optimised Feasibility Study of October 2005, used the May 2005 databasethat contained 395 Sorowar holes (33,300 metres of drilling). The updated estimate uses data from an additional 42 drillholes (4,124 metres ofdrilling) that focussed on testing oxide gold mineralisation at Sorowar Camp tothe immediate west of the Sorowar pit design, at East Sorowar several hundredmetres to the east of the pit design, and at Induced Polarisation geophysicalanomalies at various locations peripheral to the pit. The locations of areasdrilled are shown on Figure 1. As in the October 2005 estimate, geologicaldomains representing oxide, transition and sulphide material types weremodelled, with separate 'floating' pods of transition and sulphide materialwithin the oxide domains. Grade estimation was by ordinary kriging within thegeological domains. In the Measured, Indicated and Inferred Oxide Resource inventory, at a 0.5g/t Aucutoff, the update has added 0.25Mt of Resource for an additional 9,000 ouncesof gold but importantly has moved 0.76Mt of Inferred Resource into the higherconfidence level Indicated category. A further 24,000 ounces of gold have beenadded to the Sulphide Resource. The additional oxide mineralisation is located on the east and west margins ofthe Resource model, as shown in Figure 1. The red line encloses the 2005estimation envelope, and the green line encloses the 2006 updated envelope. Theproposed pit design currently encloses almost all of the existing Sorowardrillholes, so step-out drilling will be required in all directions prior to afinal pit design. • Recent intercepts at Bekou prospect, that have yet to be incorporated into new Resource estimates, include: o 10m at 1.52g/t gold from 21m in RC1209 o 2m at 3.99g/t gold from 17m in RC1210 o 20m at 2.53g/t gold from surface, including 13m at 3.39g/t gold from 7m in RC1219 o 21m at 1.93g/t gold from surface in RC1220 o 9m at 4.19g/t gold from surface in RC1221 o 8m at 1.19g/t gold from 4m in RC1226 o 11m at 2.57g/t gold from 1m in RC1229 o 5m at 5.10g/t gold from 4m in RC1230 o 24m at 1.88g/t gold from surface, including 12m at 2.41g/t gold from 12m, in RC1240 • Recent intercepts at Pigicow prospect, that have yet to be incorporated into new Resource estimates, include: o 2m at 1.45g/t gold from 2m, and 6m at 2.54g/t gold from 25m in RC1282 o 18m at 2.22g/t gold from 7m in RC1283 o 6m at 5.23g/t gold from 12m in RC1284 o 17m at 2.19g/t gold from 1m in RC1290 o 12m at 2.31g/t gold from surface in RC1295 o 8m at 1.92g/t gold from 2m, including 3m at 4.11g/t gold from 6m, in RC1296 • Metallurgical hole SO34 inside the proposed Sorowar oxide pit intersected 46m at 4.7g/t gold from surface. • Diamond drilling and IP geophysical surveys commenced at the Talik prospect in central Tatau Island. EXPLORATION Phase 5 Drilling RC drilling designed to further test oxide gold mineralisation at the Bekou andPigicow prospects, and for sterilisation near the Sorowar deposit, continuedduring the Quarter. One diamond hole was drilled within the proposed Sorowar pitfor metallurgical samples. A total of 4,081 metres of RC and 86.0m metres of diamond core was drilled onSimberi Island during the Quarter. Oxide Gold Mineralisation Target - Bekou At Bekou, to the immediate west of Samat South, thirty-four shallow RC holeswere drilled (771 metres) in addition to fourteen holes (351 metres) drilledlast Quarter (total 1,122 metres of drilling, average hole depth 23.4 metres) tofurther test known oxide (and underlying sulphide) gold mineralisation. Allassay results have been received. The occurrence and depth extent of oxidematerial, and of both oxide and sulphide gold grades, suggest goldmineralisation is focussed on structures along and adjacent to Botlu Creek. Oxide Gold Mineralisation Target - Pigicow At Pigicow, to the immediate north of Bekou, 55 shallow RC holes were drilled(1,531 metres of drilling, average hole depth 27.8 metres) out of a 100-holeprogramme, to further test known oxide (and underlying sulphide) goldmineralisation. Assay results have been received for the first 31 holes. Theoccurrence and depth extent of oxide material, and of both oxide and sulphidegold grades, suggest gold mineralisation is present in several discrete areas onthe crest of the ridge at the centre of Pigicow. Sterilisation drilling at Sorowar Results have been received for 16 holes (1,779 metres) drilled at infrastructurelocations for two of three alternate proposed aerial rope conveyor load pointsat Sorowar. The preferred rope conveyor load point was tested by holes RC1265and RC1266 in which there were no materially significant intersections. Metallurgical hole at Sorowar Diamond hole SO34 was drilled at Sorowar for metallurgical samples, within theproposed pit design. The PQ core was cut into two halves with a diamond saw. Onehalf was assayed, and the other half was used for metallurgical testwork. GPS Control Survey and Grid Change In July 2005, a GPS Control Survey was completed by McMullenNolan Pty LtdSurveyors on both Simberi and Tatau Islands, using two Leica 1200 dual frequencyGPS receivers. The objective of this work was to identify the reason for thepoor and inexplicable performance of modern GPS units on the islands withrespect to the existing Simberi Grid, and to recommend remedial action. The mostobvious manifestations of the problem were marine GPS systems on shipping atPigiput Bay beach indicating a location 40 metres inland, and variable errorselsewhere within the Simberi Island prospects. McMullenNolan concluded that the existing Simberi Grid was incompatible with GPSfor several reasons. The truncated AMG Simberi Grid has its origin at PSM Mike9on Simberi Island, but the orientation of the grid is such that it diverges fromAMG progressively away from the origin. In addition, there are issues related tooriginal inaccuracy of the location of PSM Mike9, and tectonic plate movement. McMullenNolan recommended the establishment of a true earth coordinate systemusing a transverse mercator projection based on a geocentric datum compatiblewith GPS (WGS84). The grid is to be called the Tabar Islands Grid (TIG) and willbe useable over the whole Tabar Island group. Its parameters are: • Ellipsoid GRS80 (or WGS84) • Projection Transverse Mercator • Latitude of Origin 0 degrees • Central Meridian E 151 degrees 58 minutes • False Easting 40,000 • False Northing 500,000 • Scale Factor 1.00002985 • Zone Width 15 minutes • Datum ITRF2000 (Epoch 12.7.2005) The new TIG is now being implemented on Simberi Island for both exploration andmine development activities. In previous Quarterly Reports and public releases, drillhole coordinates havebeen reported in Simberi Grid. Drillhole coordinates in this Quarterly arereported in TIG, for the first time. Drillhole coordinates in Simberi Grid canbe converted to TIG using the following transformation: TIG EAST = (Simb East x 1.0000184742) + (Simb North x 0.0000723594) + 34993.496 TIG NORTH = (Simb North x 1.0000184742) - (Simb East x 0.0000723594) + 200104.755 Geophysical (IP) Survey at Botlu The geophysical pole-dipole induced polarisation survey at Botlu prospect onSimberi Island was completed during May, prior to the IP crew moving to TatauIsland. Strong IP anomalies are present in survey data collected on five of the2,000 metre traverse lines. Two-dimensional inverse modeling of the data identified several zones of strongchargeability, generally located near the margins of bodies of higherresistivity. The resistive bodies are typically flat lying, rootless and up to150m thick. The chargeable zones are interpreted as being due to 3-5% sulphidesnear the contacts of resistive intrusions. The chargeable zones are generallydeeper than the existing drillholes however, most of the higher grade goldintersections occur in holes that are located above or near the most chargeablebodies. TATAU EXPLORATION PROJECT - EL 609 Tatau Island Exploration Camps The field base camp established at Tomalabat on the southern coast of TatauIsland is now operational. A fly camp has been established at the Talik prospectin the centre of the island to support drilling and geophysical survey teams. Drilling at Talik Prospect, Tatau Island Diamond drilling at the Talik prospect in central Tatau Island commenced in June(Figure 6). The first drill hole TA01, targeting an interpreted magnetic bodybeneath anomalous surface gold geochemistry, was terminated at 195.9 metresdepth due to imminent drill pad failure caused by torrential rain. However, thehole achieved its objective by intersecting the magnetic target from 120 metresdepth, consisting of volcanic fragmentals and microdiorite containing secondarymagnetite and abundant sulphides (3 to 5 percent). Subsequently, an RC drillingprogramme commenced to test anomalous gold (greater than 1g't Au) in surface10-metre bench channel samples. The first hole, RC2001, reached 30m depth by theend of the Quarter. No assay results have yet been received. IP Surveys at Talik Prospect, Tatau Island An Induced Polarisation geophysical survey commenced at Talik in June. Two ofthe eleven 1,500 metre long traverses have been completed, with two-dimensionalinverse modeling of the data on both lines showing moderately strongchargeability and resistivity anomalies. CORPORATE Placement of 21.8 million shares Completion of the placement of 21,800,000 ordinary shares at AUD$0.60 per shareto raise AUD$13,080,000 (approximately US$10,000,000) before expenses. Theplacement has been made to international institutional clients of UK basedMirabaud Securities Limited. This placement brings the total raised in equitymarkets since December 2005 to A$64.8 million (approximately GBP27 million). The funds raised in the placement will be applied to enhance development of theSimberi Oxide Gold Project into gold production in Q2 2007 as well as providingadditional funding for wider exploration in the Tabar Islands. In particular,Allied Gold will investigate the outright purchase of key logistical equipmentsuch as a barge for transportation of heavy goods and equipment to and from theTabar Islands and the mainland, and the purchase of one or more drill rigs. Suchpurchases of key items of equipment will not only provide operating costsavings, but will enable the Company to schedule critical path logisticalmovements to suit its own planning, and to plan further ahead for explorationdrilling. Resignation and appointment of Managing Director On the 30th June 2006 Mr Wayne Loxton resigned as Managing Director. TheChairman, Mr Mark V. Caruso assumed the role of Managing Director in theinterim. The Company is actively seeking an executive replacement to the Board. CASH AND SECURITIES ON ISSUE At 30 June 2006, Allied Gold Limited had AUD$55 million cash in hand. Thisrepresents 20 cents per Allied Gold Limited share. There were 28,365,228 shares issued during the quarter. Current issued securities comprise; 272,022,528 fully paid ordinary shares 22,152,183 options expiring 30 June 2007 exercisable at $0.30 For enquiries in connection with this release please contact: Allied Gold Limited +61 8 9353 3638 phone +61 8 9353 4894 fax [email protected] e-mail Roland Cornish Beaumont Cornish Limited, Nominated Adviser Telephone 0207 628 3396 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 by MrG 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 J Battista of Golder Associates who is a Member of theAustralasian Institute of Mining and Metallurgy. Mr Battista 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 Battista 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). Paste the following links into your web browser to download the PDF documents related to this announcement: http://www.rns-pdf.londonstockexchange.com/rns/0895h_1-2006-8-1.pdf http://www.rns-pdf.londonstockexchange.com/rns/0895h_2-2006-8-1.pdf This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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