lihir receives interest on ballarat mine

Lihir receives interest on Ballarat mine

AAP
2009-07-21
Papua New Guinea-focused gold miner Lihir Gold Ltd says it has received expressions of interest to buy its smallest and least productive asset, the Ballarat mine in Victoria.

Lihir did not disclose the potential purchase price but said it would book an impairment charge associated with the Ballarat asset in the range of $US250 million ($A307.79 million) and $US350 million ($A431.02 million) after tax.

"Underground development activity has been reduced from today," Lihir said in a statement on Tuesday.

"Total staff numbers therefore will be reduced to approximately 100 in order to maintain operations during a transition to new ownership."

Lihir last month flagged it would write down the value of the mine by up to $US350 million following mixed results from the central and southern zones in the March quarter.

The book value of the net operating assets was $US457 million ($A562.5 million) at December 31, 2008.

The company last month cut its full year production forecast for Ballarat to 20,000 ounces (oz), down from an already revised 50,000 oz.

It also said at the time that longer-term annual production at the mine of between 80,000 oz and 100,000 oz depended on the success of drilling and development programs in the northern zone.

But Lihir said on Tuesday that the project would "not sustain large scale bulk mining techniques, with production unlikely to exceed 100,000 ounces per year".

"As we have continued to develop the project, it has continued to become clear that the long-term production capability of the mine is going to be limited to around 80,000 to 100,000 oz, so essentially it is not going to be big enough to fit in the portfolio," a Lihir spokesman told AAP.

Managing director Arthur Hood said in a statement that Lihir's strategy was to pursue larger-scale, low-cost operations, so Ballarat did not meet the miner's preferred investment criteria.

"The disposal of the asset will enable management to focus on growth opportunities being developed in West Africa and at our Lihir Island operations in PNG," Mr Hood said.

He said Lihir aimed to preserve as many jobs as possible during the sale process.

About 300 staff worked at the mine previously.

It was purchased in October 2006 under a scrip deal worth $440 million, but was never ramped up to full capacity.

Shares in Lihir were unchanged at $2.90 at 1524 AEST.

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