Allied Gold Limited

Allied Gold Limited, an Australian-based gold production and exploration company, continues to move from strength-to-strength in Papua New Guinea (PNG).
The company’s strategy, to increase its gold inventory on Simberi Island by defining additional resources with a view to expanding annualised production, has served it well and resulted in a host of big announcements throughout 2009.

In June, Allied announced the production of the 100,000th ounce of gold at its Simberi Oxide Gold project. Just one month later, the company told press that its combined Simberi Ore Reserves had exceeded one million ounces. In September, more good news followed when Allied announced new high-grade gold assays from core holes drilled at the Pigiput and Pigibo gold prospects within the Simberi project.

These are just a few of the company’s more recent achievements, however, in order to fully appreciate how far Allied have come, IRJ spoke with Mark Caruso, Executive Chairman, about what it takes to become a such a success story.

Allied Gold—A History
Our story takes place amidst the Tabar Islands Group, home to Allied’s Simberi Oxide project. The group is made up of the Simberi, Tatau, Mapua and (Big) Tabar Islands and is situated in the north of the New Ireland Province of Papua New Guinea approximately 130 kilometres east of Kavieng, the provincial capital.
Between 1983 and 1993, exploration across the Tabar Islands was carried out by a joint venture between Kennecott Explorations (Australia) Pty Ltd and Niugini Mining as operators and Nord Pacific as the minor partner.

In 1993, Nord Pacific acquired the interests of Kennecott Explorations and Niugini Mining who chose to focus on the development of mining operations on Lihir Island (also known as Niolam Island), the largest in the Lihir group of Islands in PNG. Following a promising feasibility study in 1996, a mining lease (ML136) was granted to Simberi Gold Company Ltd, a subsidiary company of Nord Pacific.

The declining gold price between 1996 and 2003 waylaid progress for some time, but then when gold began to climb again, a review and update of the 1996 feasibility study took place (in 2003), confirming the economical and technical viability of an oxide gold mining project on Simberi Island.

The year 2003 continued to be a particularly poignant one. It was then that Allied Gold acquired Nord Pacific, and by 2005 the company had 100 per cent ownership of the Simberi Gold project. Back then, Simberi was a fairly small project, totalling one million resource ounces (of which roughly 300,000 were reserve ounces) with a project development profile of around 10 years at 30,000 ounces.

Allied then updated the feasibility study of 2003. This version included both higher reserves and investigation of a higher process plant throughput of 1.65 Mtpa. According to the Optimised Feasibility Study, the project was set to mine and process 15.4 Mt of ore over a 9.4 year mine life, recovering 685,000 ounces of gold.
Throughout 2006, the company updated their resource estimations and worked with both the PNG Department of Mines and the PNG Mineral Resources Authority to develop operations fit for this increasing resource.

In May 2007, the PNG Mineral Resources Authority granted formal approval to extend the term of ML136 to expire on December 2, 2018. By February 2008, Allied made its first gold pour on the project. Fast-forward to May of this year, and the resource had increased by 45 per cent, reaching 4.7 million tonnes.

Simberi Gold today
Today Simberi’s Measured, Indicated and Inferred mineral resources total 4.7 million ounces of gold and 10 million ounces of silver. Caruso says that this is made up of 1.4 million ounces in gold oxide and 3.3 million ounces in gold sulphite resources—a far cry from the much more modest count of 2003.

Allied has discovered approximately 3.6 million ounces of gold since acquiring this project, commissioning an expansion of the existing processing plant to increase capacity from a 2.2 million tonnes per annum facility to service a three million tonnes per annum project.

One particularly pivotal part of Simberi’s growth aspirations is the Pigiput prospect, home to the Inferred sulphide resource within the Simberi Mining Lease.
New ore reserves at this deposit have added two years to the project’s mine life. On October 15, Allied announced further high-grade gold assays from diamond drill core at Pigiput and Pigibo.

“Gold assays received from seven diamond core holes drilled at the Pigiput Deposit are part of an ongoing in-fill and step-out program which are to be incorporated into the A$10 million Sulphide and Oxide Expansion Studies that targets increasing total oxide and sulphide production to in excess of 200,000 ounces pa by 2012,” Allied’s press release states.

“At Pigiput, core drilling is being used to in-fill and extend the drilling coverage, aiming to increase resources in sulphide, currently classified as Indicated and Inferred, to a higher category. Since start-up in mid May to end September 2009, 21 exploration diamond core holes, totalling 5,930m, have been completed. The current infill and drilling programs is scheduled for completion in early 2010,” it continues.

Allied is confident that it will complete and increase the current resource and reserve by the end of the first quarter in 2010.

The Pigiput sulphides weight in at about 705,000 ounces at four grams per tonne gold and Caruso says that Allied is working to reach one million ounces of reserves to support an organic sulphide expansion.

Through this sulphide expansion, Allied seeks to increase the total annual production at Simberi to approximately 200,000 ounces by December 2011.

Allied’s future potential
Allied’s gold project has not gone unnoticed by the world’s major players.

Gold industry leaders Barrick Gold Corporation may fund up to $20 million dollars of exploration over an eight year period with a view to acquire up to 70 per cent of Allied’s Tabar Island licenses, excluding the Simberi mining lease, and have already spent nine million over the first two years.

Caruso explains that the logistical set up of the company is critical in PNG. Allied has a mine which is operating at nameplate capacity, despite adverse weather conditions which have seen over eight metres of rain fall for 2009. The oxide expansion should be given the green light within the next month which should take gold production to over 100,000 ounces by June 2010. The sulphide feasibility study is progressing well, and geologically the Simberi Island remains open with 4.7 million ounces of resource confirmed so far. It is projected to add a minimum of 100,000 ounces of sulphide production by 2013 to bring the total gold production on Simberi to +200,000 ounces.

Takeover bid for Australian Solomons Gold (ASG)
Allied Gold Limited announced an agreed off-market offer to ASG, a Canadian listed company, which owns the Gold Ridge Project on Guadalcanal in the Solomon Islands. Gold Ridge produced 210,000koz from August 1998 to June 2000 before closure due to civil unrest. ASG’s key shareholder RCF (49 per cent of ASG) has agreed to the offer, as has the current Board who have endorsed Allied’s offer as being the best opportunity to re-develop Gold Ridge (subject only to a higher offer).

If successful, this potential acquisition will add a further 130,000 ounces of gold production by the first quarter of 2011, taking total group gold production to in excess of 300,000 ounces. Furthermore, a successful acquisition of ASG will take the combined groups reserve base to 2.2M ounces and reserves and resources to 2.67M ounces.

Allied Gold has come a long way since it acquired the 300,000 ounce project of 2003, but it looks like the best is yet to come as it moves to become a 300,000oz producer with significant exploration upside within the Pacific Rim.

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