MINE OF THE MONTH – LIHIR, PAPUA NEW GUINEA
The Papua
performer
Despite a production setback in late 2005, Papua New
Guinea’s Lihir Gold is going from strength to strength
after separation from long-term partner, Rio Tinto
F
OLLOWING its final break from Rio Tinto
last November, the remote Lihir Island gold
mine in Papua New Guinea off New Ireland
has ramped up to record production levels,
with a March-quarter production figure of
184,000 oz, leaving owner Lihir Gold Ltd on track for
a full-year record total of 670,000 oz. This figure is set
to increase further to over 800,000 oz next year after
the addition of a flotation circuit.
Speaking at the company’s annual general meet-
ing in Port Moresby on April 24, managing director
Arthur Hood said of the figures: “Mining performance
has improved markedly, costs remain under control
and good progress has been made in development
projects … this is the fifth-best quarterly production
achieved at Lihir since mining commenced in 1996.”
On the back of rising gold prices, revenues for the
March quarter topped US$100 million for the first
time, while operating cashflow for the three months
reached US$46 million. One of Lihir’s main strengths
is the size of its reserves, which stood at over 20 Moz
at the end of 2005, from a resource of about 40 Moz.
GOING IT ALONE
The separation from Rio Tinto represented a major
milestone for Lihir, reflecting the fact that it had
matured into a US$1.5 billion company, with a
well-established operation and sound financial
base. Mr Hood described Lihir in 2005 as being
“big enough and strong enough to stand on its
own two feet”.
From 1995, when the mine opened, until the
decision to sell its 14.46% shareholding in late 2005,
Rio Tinto had managed Lihir Gold, but its influence
O&K RH 200 hydraulic excavators
loading Caterpillar 785 trucks at Lihir
Photo: Lihir Gold
12 Mining Magazine August 2006
12-13MM0608.indd 12
had been gradually winding down in the few years
before the move.
At the time of the sale, Rio Tinto’s chief executive,
Leigh Clifford, said: “Rio Tinto generally does not hold
long-term minority positions in other listed compa-
nies. Following our relinquishment of management
rights announced on September 16, 2005, we have
taken advantage of the current favourable market
conditions to sell our holding in Lihir.”
Lihir Gold told Mining Magazine: “It is a major step
in the development in the company. In the past, Lihir
was run essentially as a semi-autonomous operat-
ing division of Rio Tinto. The CEO was based on the
island, and was very operationally focused, as a mine
manager might be in a multi-mine company like Rio
… we are now transforming into a mature corporate
identity, with a management team singularly focused
on the growth and profitability of this company.”
Lihir sees the sale as having marked the transition
from a long period of development, during which
time the very large, but also geologically- and techni-
cally-challenging orebody, entered a new era of ex-
panded production and reduced costs. The markets
have recognised Lihir’s future potential: the company
stock value increased by 88% last year, making Lihir
Gold one of last year’s ten best-performing stocks in
the ASX 200.
It has not all been plain sailing. The improved
production figures for early 2006 come after a major
setback for the mine on October 9, 2005, when a
landslide on a hillside north of the mine killed two
workers, ruptured the water supply to the process-
ing plant, and cut off an access road from the main
worker township of Londolovit and the mine. The
pipe rupture meant that processing had to be
suspended for a month, and, ultimately, cost about
100,000 oz of production for the year, which stood at
596,000 oz. Lihir had originally aimed for a 2005 figure
of 700,000 oz.
PROCESSING
Run-of-mine stockpiling and primary crushing
facilities, incorporating a gyratory crusher, are in the
Ladolam Creek area, about 500 m east of the orebod-
ies. The main processing plant lies in an area known
as Putput, at the mouth of Luise Harbour.
Lihir ore is refractory, meaning that conventional
extraction of gold by cyanidation is not viable without
pre-treatment. The Lihir process plant incorporates
a pressure oxidation pre-treatment step using auto-
claves to release the gold. This, in turn, is followed by
conventional cyanidation.
The plant’s facilities first crush the ore and convert
it into a slurry suitable for pressure oxidation. A small
flotation plant is sometimes used to concentrate
a portion of the slurry as required. The ore is then
subjected to pressure oxidation, counter-current
decantation (CCD), neutralisation, carbon-in-leach
(CIL) and tailings disposal. Gold is recovered from
the CIL process through carbon stripping, electro-
winning and smelting.
The processing plant was initially designed to
treat 375 t/h of ore at a design sulphur grade of
7.2%. A design autoclave operating time of 89% of
total time was used resulting in a plant capacity of
2.9 Mt/y. The processing plant was upgraded in 1999
to include a second oxygen plant and a small flotation
plant. Three autoclave heat recovery vessels, used
26/7/06 17:41:58
 to pre-heat autoclave feed were installed in 2001
along with a 12th power generator. In 2002, a pebble
crushing circuit was installed in the grinding area to
raise grinding capacity, and three extra autoclave feed
pumps were installed in 2003. In 2004, a new carbon
regeneration kiln was installed to increase gold
recovery from the CIL circuit.
NEW HORIZONS
A new flotation circuit, under construction for about
US$162 million, is due for commissioning in the
March quarter of 2007. This will increase the capacity
of the plant to over 800,000 oz/y, although the
company regards a production rate of 1 Mt/y as an
achievable medium-term target: a goal which is seen
as likely to be “well advanced” by the end of 2008.
Aver Kvaerner has been selected as the engineer-
ing, procurement, construction and management
(EPCM) contractor for the flotation plant project,
which incorporates Outokumpu cells and the Outo-
kumpu FrothMaster, which is the first instrument and
control package that converts froth image analysis to
useful plant measurements and controls, enhancing
the performance of flotation cells. Outokumpu also
supplied new ball and SAG mills for a processing
plant upgrade that was completed in the March
quarter of this year.
The expansion should have a
major impact on the overall “One of the
economics of the operation,
because the additional operating
main cost
costs associated with the circuit are factors at Lihir
relatively low. Work began on the
bulk earthworks for the mill and
was petroleum-
flotation areas in the March quarter derived power in
and installation of the water supply
pipeline and the critical tie-ins to the face of rising
the existing plant were completed
during a maintenance shutdown.
oil prices”
FLEET ADDITIONS
In terms of mining equipment, there have been
additions on an annual basis, with five new trucks
and one new shovel added in both 2005 and 2006.
Two O&K shovels were also added during this period.
The overall equipment tally at Lihir is now impressive:
79 mining units in total, consisting of five RH200
O&K shovels, 34 Caterpillar 785 haul trucks (both C
and earlier models), six drill rigs, five barges and five
Caterpillar 777D haul trucks along with graders, doz-
ers and excavators. Two more Caterpillar 785s are set
to be bought next year.
The transition of mining operations from the
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NEW GUINEA GOLD MINES* (NEW GUINEA ISLAND IS DIVIDED BETWEEN PAPUA NEW GUINEA
AND IRIAN JAYA OR WEST PAPUA, PART OF INDONESIA)
Operation Type Location
Kainantu U/G Eastern Highlands
Province, PNG
Lihir O/P Lihir island, off
New Ireland, PNG
Ok Tedi O/P Mount Fubilan,
Western Province,
PNG
Porgera U/G Enga Province,
and O/P PNG
Tolukuma U/G Goilala District,
and O/P Central Province,
PNG
Grasberg O/P Irian Jaya
(Indonesia)
*Operations do not include Indonesia, with the exception of Grasberg
original, now largely-depleted Minifie pit, where min-
ing began in 1997, to the new Lienetz pit was also
completed in 2005. Lienetz is a rich orebody, deeper
than Minifie, but higher in grade. It will be the main
source of ore for many years. Mining
in Lienetz is due to continue until
2015, when the focus will shift to a
third pit: Kapit.
Overall mining in 2005 totalled
about 42 Mt of ore, which was well
below the stated target of 54 Mt,
partly due to the landslide, which
reduced productivity by requir-
ing employees to be moved into
and out of the mine by boat. The
availability of equipment availability
also had a major impact. A total of
3.5 Mt of high-grade ore was mined
in the year, down from 5 Mt in 2004, due to the stage
of development of the pits. Some 5.9 Mt of economic
grade ore was mined, down from 6.6 Mt in the prior
year. The company said it was disappointed with the
total mining cash cost for the year (US$234/t). How-
ever, this is expected to fall for the full 2006 year, with
higher productivity and improved availabilities.
Ore grades improved steadily over the full year
as the richer segments of the Lienetz orebody were
reached. For the year, the gold grade was 5.98 g/t,
and reached a record 8.54 g/t in the December
quarter. In addition, a new US$5 million gravity
circuit supplied by Australia’s ConSep Pty Ltd was
commissioned in September 2005 to capture free
gold being encountered in the Lienetz ore. This
should lead to improved recoveries in future. The
circuit utilises two KC-XD-48 Knelson concentrators,
while the concentrates are treated with a ConSep
CS3000 intensive cyanidation fluidised bed reactor.
GOING GEOTHERMAL
One of the main cost factors at Lihir was petroleum-
derived power in the face of rising oil prices. In April
2003, the company started to address this by com-
missioning a 6 MW geothermal power station: the
first in Papua New Guinea to use natural geothermal
energy for generating electricity, not only for the
Operator 2005 attributable Year production
(% share) gold production (oz) began
Highlands Pacific 115,000 (expected 2006 2005
Ltd (95%) figure, production began
December quarter 2005)
Lihir Gold Ltd 596,000 1997
Ok Tedi Mining Ltd 574,694 1984
Placer Dome/ 635,348 1990
Barrick (75%)
Emperor Mines Ltd 68,370 1990
Freeport McMoran 2,789,400 1988
Copper and Gold
(60%)
mine, but also the whole island.
This has since been ramped up by adding a 20 MW
power plant commissioned in July 2005. Capacity
is now being expanded from 36 MW to 56 MW, due
for completion before the end of the year. Steelwork
for the powerhouse building is 80% complete and
concrete foundations for the cooling tower in place.
THE TAILINGS ISSUE
Lihir Gold uses submarine tailings disposal, and is
now the region’s only mine to use this method, after
the closure of Placer Dome’s Misima mine in 2004.
Treated neutralised tailings are released by
pipeline at a depth of 128 m, below the surface zones
which are most ecologically active, and then settle
some 2 km below sea level. The company says it does
not undertake any riverine tailings disposal. A Lihir
representative told Mining Magazine: “This process
is very carefully managed to ensure that the impact
on the environment is minimised. In an area like Lihir,
where there is some residual geothermal activity,
and where flat, arable land is a scarce resource, land-
based tailings dams are simply not an option. We
have very strict controls in place and we constantly
measure the impacts on sea-life.”
The idea is that the tailings continue to descend
rapidly beyond the pipeline. Waste rock is discarded
by barges in designated disposal zones that are
100 m-plus deep. These zones lie above steep sub-
marine canyons, down which the rock descends. The
waste rock mixes with the tailings and settles on the
ocean floor.
The counter-argument is that many species of fish
descend to these depths to feed anyway, and that
the ocean ends up with a blanket of waste rock that
smothers it and forces marine life to move elsewhere.
August 2006 Mining Magazine 13
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