Simberi Sulphide PFS Underpins Production Increase

 

TIDMAGLD 
 
RNS Number : 9382V 
Allied Gold Limited 
10 November 2010 
 

 
 
 
FOR IMMEDIATE RELEASE                                                       10 
November 2010 
 
 
 
                              allied gold limited 
 
                   ("Allied", "Allied Gold" or "the Company") 
 
 
 SIMBERI SULPHIDE PFS UNDERPINS INCREASE IN GROUP PRODUCTION TO 320,000 OZPA BY 
                                      2015 
·    Sulphide Pre-Feasibility Study completed: 
-     Net Project Cash Flow A$750 million (pre tax) 
-     Sulphide PFS Project NPV (10%) A$334 million (pre tax) 
-     Cash Costs A$678/oz (US$542/oz) 
·    Bankable Feasibility Study (BFS) has commenced and will assess increased 
sulphide throughput option from 1.5 Mtpa to 2.5 Mtpa 
·    Subject to BFS completion Group production planned to increase to an 
average 320,000 ozpa by 2015 including combined Simberi oxide plant expansion 
(100,000 ozpa) and sulphide production (100,000 ozpa), and Gold Ridge 
redevelopment (120,000 ozpa) 
 
Comment by Executive Chairman Mark Caruso; "The growing oxide and sulphide 
resource endowment at Simberi, which currently stands at 6.2 million ounces, 
warrants a production platform of at least 200,000 ounces per annum. The 
sulphide prefeasibility study highlights robust project economics, and as part 
of the bankable feasibility study over the next 12 months we will look at 
throughput options to increase the sulphide circuit from a proposed 1.5 Mtpa to 
2.5 Mtpa with the potential for the Simberi oxide/sulphide circuit to produce 
circa 250-300,000 ounces of gold per annum. We are also confident that the 
sulphides and oxides resource inventory will increase as a result of the planned 
aggressive drilling program." 
The preliminary evaluation of developing the Simberi sulphides through a 1.5 
Mtpa process circuit has been completed. 
The Pre-Feasibility Study (PFS) has demonstrated that the development of the 
sulphides is technically feasible and economically viable. 
The study has also indicated that a larger treatment plant (2.5 Mtpa) may be 
appropriate given additional sulphide resources that may be discovered and to 
allow the Company leverage and exposure to future gold price movements. 
 
Process: The PFS investigated the processing of refractory gold ore via the 
roasting of a concentrate.  The flotation plant was scaled at 1.5 Mtpa 
throughput and high level test work has resulted in 93% gold recovery in a 
pyrite concentrate. The mass recovery from flotation was approximately 14%. 
Concentrate grade is approximately 22 g/t gold, 23% contained sulphur and low 
levels (0.3%) of arsenic. 
Laboratory test work has shown that the concentrate is amenable to mineral 
roasting followed by thickening of the calcine (roaster ash) and conventional 
leach/CIP treatment to recover the gold. 
The overall gold recovery through the entire process is approximately 82%. 
The sulphur contained within the concentrate feed acts as fuel for the roaster. 
The sulphur dioxide gas produced in the roasting process is captured and reacted 
with the concentrate tailing to produce a stable sulphate compound to be 
disposed via the existing DSTP tailing system. 
 
Resources: The sulphide resources that form the basis of the study occur at 
Pigiput and Pigibo deposits and to a lesser extent the Samat deposits. 
During the course of the study over 38,000 metres of drilling has been completed 
and a recent Resource upgrade (June 2010) and Reserve estimation (September 
2010) has resulted in substantial increase in both oxide and sulphide gold 
inventory. The Simberi Reserves table is in the Appendix. 
Current Measured, Indicated and Inferred Mineral Resources total 6.2 Moz and 
include total Proven and Probable Reserves of 2.2 Moz of which approximately 
half are sulphide hosted. 
Under-explored known sulphide resources also occur at the largest oxide deposit 
at Sorowar and also at the Botlu deposit. Both these areas require additional 
exploration drilling to define extent and resource size and grade. 
Further exploration for additional oxide resources is also planned, particularly 
in the Sorowar and Pigibo areas. 
 
 
Oxides: The existing Simberi oxide process plant has a nameplate capacity 
of 
 2 Mtpa to produce on average 70,000 ounces of gold per year. At this 
production rate treatment of the oxides would take approximately 13 years. More 
importantly the sulphides ores at Pigiput and Pigibo are overlain by 
approximately half the current oxide reserves which would at existing processing 
rates take over 6 years to treat. 
Given the large oxide resource, the current gold price, and the requirement to 
access sulphide ore the Company has embarked on an oxide plant upgrade to 3.5 
Mtpa, throughput although further expansion to 5 Mtpa plus will be reviewed. The 
3.5 Mtpa upgrade will result in average annual gold production of 100,000 ounces 
per year and allow access to the sulphide ores by 2015. 
The expansion consists of a new ore reclaimer, a 2.5 MW SAG mill, additional 
leach tanks, a 26m diameter thickener as well as pump, piping and services 
upgrade commensurate with the increased throughput. 
The oxide upgrade will cost A$32 million including owners costs and 
contingencies and the expansion will be completed December quarter 2011. 
Work in progress and completed to date includes; 
·      Engineering design, 75%  completed 
·      Site earthworks leach tanks, in progress 
·      Foundation investigation for SAG mill, leach tanks and thickener, 
drilling completed laboratory testing and reporting in progress 
·      Procurement of SAG mill and delivery to site, in progress 
·      Fabrication of tank plate and structural steel, in progress 
·      Rerouting of services (power, water & communication cables), completed 
·      Other upgrades in the existing plant to expansion capacity including 
elution and intertank screens completed, and lime slaking plant in progress 
 
BFS:  The timetable forward to complete a Bankable Feasibility Study (BFS) on 
the sulphide development is to continue exploration drilling on Simberi Island 
and other targets within the Company's exploration licence over Tatau and Tabar 
Islands. 
The Company plans to initially carry out sulphide targeted drilling over the 
Sorowar deposit in 2011. This deposit is strategic to the Simberi operations 
because once mining is completed the void will be used to hold mine waste. 
Before this can be done the area needs to be sterilised. 
Other technical work includes a pilot plant roaster test work to optimise 
roaster design and define capital and operating costs. 
The Company plans to have the BFS completed for an investment decision by early 
2012 and construction completed by December 2014. Should gold prices strengthen 
further in 2011, Allied could potentially accelerate the BFS and bring forward 
the sulphide development. 
 
Key metrics: The sulphide key metrics and financial results are shown in table 2 
of the full release.  The table shows the sulphide and oxide operations as 
combined operation.  The oxides and sulphides are intrinsically related, with 
the development of the sulphides dependent on removal of the oxides. 
Capex: The estimated A$278 million capital cost (summarised in table 1 of the 
full release) is inclusive of the current A$32 million oxide plant expansion, 
mining fleet and haul roads that are required for the upgraded oxide/sulphide 
operation. 
Modelling: The financial modelling demonstrates that the sulphide operation in 
conjunction with the oxide operation is financially positive with pre-tax NPV 
(10%) of A$334M and total project cash flow before tax of approximately A$750M. 
The analysis is based on US$1,000 gold price and AUD/USD exchange rate of 
A$0.80. The project is sensitive to gold price and this is demonstrated in the 
sensitivity chart included in the full release. 
Material Movement: Based on 1.5 Mtpa, the sulphide operation will process 14.8Mt 
of ore at an average grade of 2.41 g/t gold. Before the sulphide ore can be 
mined approximately 20 Mt of oxide ore and about 24 Mt of oxide waste needs to 
be removed. In addition approximately 9.1 Mt of lower grade oxide ore will be 
stockpiled for processing at the end of the mine life. 
The life of mine waste to ore strip ratio for all materials mined is 1.2. 
The expansion of the oxide plant to 3.5Mtpa throughput in conjunction with 
stockpiling will allow access to the sulphide ores by start 2015. 
The open pit mining will be undertaken using ridged frame haul trucks loaded by 
hydraulic excavators. Drill and blasting of the sulphide ore and waste will be 
undertaken however blasting requirements in the oxides will be minimal. 
The oxide ore will be trucked to the existing rope conveyor at Sorowar which has 
been upgraded as part of the expansion to deliver 3.5 Mt (dry) to the process 
plant at Pigiput Bay. A waste repository located near the load end of the rope 
conveyor will accommodate Sorowar oxide waste (approximately 12 Mt) and this 
area estate will be used to stockpile the low grade oxide waste. 
The Sorowar pit will, once exhausted, be used as a repository for acid producing 
sulphidic waste. Initially the sulphide ores will be delivered to the processing 
plant at Pigiput bay by haul truck but later after 2020 when oxide mining is 
finished, the ore will be transferred by the rope conveyer. 
Some portion of the mine wastes have been nominated for marine disposal and the 
material will be trucked to the coastal tip head. The production profile chart 
in the Appendix shows the material movements. 
A copy of the full announcement can be viewed on the company's website and as a 
link this announcement: 
 http://www.rns-pdf.londonstockexchange.com/rns/9382V_-2010-11-10.pdf 
 
For more details please contact: 
Simon Jemison             Investors and Media    (Aust)   + 61 (0) 418 853 922 
Rebecca Greco             Investors                     (North America)      +1 
 416 839 8610 
David Simonson          Merlin PR                    (UK)      + 44 (0) 20 7726 
8400 
 
Beaumont Cornish Limited 
 
Roland Cornish 
Beaumont Cornish Limited 
T: [phone] 
 
 
Competent Persons 
The information in this Stock Exchange Announcement that relates to Mineral 
Exploration results and Mineral Resources, together with any related assessments 
and interpretations, have been verified by and approved for release by Mr C R 
Hastings, MSc, BSc, M.Aus.I.M.M., a qualified geologist and full-time employee 
of the Company.  Mr Hastings has sufficient experience which is relevant to the 
style of mineralisation and type of deposit under consideration and to the 
activity which he is undertaking to qualify as a Competent Person as defined in 
the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, 
Mineral Resources and Ore Reserves". Mr Hastings consents to the inclusion of 
the information contained in this release in the form and context in which it 
appears.  Mr. C. R. Hastings is also a Qualified Person as defined by Canadian 
National Instrument 43-101. 
 
Forward-Looking Statements 
This press release contains forward-looking statements concerning the projects 
owned by Allied Gold.  Statements concerning mineral reserves and resources may 
also be deemed to be forward-looking statements in that they involve estimates, 
based on certain assumptions, of the mineralisation that will be found if and 
when a deposit is developed and mined.  Forward-looking statements are not 
statements of historical fact, and actual events or results may differ 
materially from those described in the forward-looking statements, as the result 
of a variety of risks, uncertainties and other factors, involved in the mining 
industry generally and the particular properties in which Allied has an 
interest, such as fluctuation in gold prices; uncertainties involved in 
interpreting drilling results and other tests; the uncertainty of financial 
projections and cost estimates; the possibility of cost overruns, accidents, 
strikes, delays and other problems in development projects, the uncertain 
availability of financing and uncertainties as to terms of any financings 
completed; uncertainties relating to environmental risks and government 
approvals, and possible political instability or changes in government policy in 
jurisdictions in which properties are located. Forward-looking statements are 
based on management's beliefs, opinions and estimates as of the date they are 
made, and no obligation is assumed to update forward-looking statements if these 
beliefs, opinions or estimates should change or 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 of 
Allied Gold, nor is this communication an offer to purchase or a solicitation to 
sell securities.  Any offer will be made only through an information circular or 
proxy statement or similar document.  Investors and security holders are 
strongly advised to read such document regarding the proposed business 
combination referred to in this communication, if and when such document is 
filed and becomes available, because it will contain important information.  Any 
such document would be filed by Allied Gold with the Australian Securities and 
Investments Commission, the Australian Stock Exchange and with the U.S. 
Securities and Exchange Commission (SEC). 
 
The technical information in the Announcement was prepared under the 
"Australasian Code for Reporting of Exploration Results, Mineral Resources and 
Ore Reserves" (JORC). 
 
Allied owns 100% of the Simberi Island gold project. 
 
Glossary of terms used in the Announcement: 
A 'Mineral Resource' is a concentration or occurrence of material of intrinsic 
economic interest in or on the Earth's crust in such form, quality and quantity 
that there are reasonable prospects for eventual economic extraction. The 
location, quantity, grade, geological characteristics and continuity of a 
Mineral Resource are known, estimated or interpreted from specific geological 
evidence and knowledge. Mineral Resources are sub-divided, in order of 
increasing geological confidence, into Inferred, Indicated and Measured 
categories. 
 
An 'Inferred Mineral Resource' is that part of a Mineral Resource for which 
tonnage, grade and mineral content can be estimated with a low level of 
confidence. It is inferred from geological evidence and assumed but not verified 
geological and/or grade continuity. It is based on information gathered through 
appropriate techniques from locations such as outcrops, trenches, pits, workings 
and drill holes which may be limited or of uncertain quality and reliability. 
 
An 'Indicated Mineral Resource' is that part of a Mineral Resource for which 
tonnage, densities, shape, physical characteristics, grade and mineral content 
can be estimated with a reasonable level of confidence. It is based on 
exploration, sampling and testing information gathered through appropriate 
techniques from locations such as outcrops, trenches, pits, workings and drill 
holes. The locations are too widely or inappropriately spaced to confirm 
geological and/or grade continuity but are spaced closely enough for continuity 
to be assumed. 
 
A 'Measured Mineral Resource' is that part of a Mineral Resource for which 
tonnage, densities, shape, physical characteristics, grade and mineral content 
can be estimated with a high level of confidence. It is based on detailed and 
reliable exploration, sampling and testing information gathered through 
appropriate techniques from locations such as outcrops, trenches, pits, workings 
and drill holes. The locations are spaced closely enough to confirm geological 
and grade continuity. 
 
Reserves - The portion of the Mineral Resources which can be extracted from the 
Earth at a profit. 
 
Proven Reserves - Ore reserves for which: (a) the quantity is computed from 
dimensions revealed in outcrops, trenches, workings or drill holes, and grade is 
computed from the results of detailed sampling; and (b) the sites for 
inspection, sampling and measurement are spaced so closely and the geologic 
character is so well defined that size, shape, depth and mineral content of 
reserves are well established. 
 
Probable Reserves - Ore reserves for which quantity and grade are computed from 
information similar to that used for proven reserves, but the sites for 
inspection, sampling and measurement are farther apart or are otherwise less 
adequately spaced. The degree of assurance, although lower than that for proven 
reserves, is high enough to assume geological continuity between points of 
observation. 
 
Tonnage - An expression of the amount of material of interest irrespective of 
the units of measurement (which should be stated when figures are reported) 
 
Grade - Any physical or chemical measurement of the characteristics of the 
Analysis (Value) material of interest in samples or product 
 
Cut off grade - The lowest grade, or quality, of mineralised material that 
qualifies as economically mineable and available in a given deposit. May be 
defined on the basis of economic evaluation, or on physical or chemical 
attributes that define an acceptable product specification 
 
Mineralisation - Any single mineral or combination of minerals occurring in a 
mass, or deposit, of economic interest 
Others 
 
Assay - The proportion of a particular metal (eg Au and Ag) in a sample derived 
by laboratory analytical techniques. 
Analysis limits of detection for Au is <0.01 g/t.  Au assays are determined by a 
50gm fire assay and an AAS (Atomic Adsorption Spectrometry) finish. Any interval 
recorded as being below detection has been recorded in the database as having a 
grade of half the detection limit, which in this case is 0.005 g/t. The Ag 
detection limit is 0.2g/t, and is derived from a 0.5g charge Aquaregia digest, 
with assay via ICP (Induced Coupled Plasma) AES. 
 
[Company] mineralisation types are: 
 
Oxide - extremely weathered material (cyanide leach recoveries > 90%), 0.5 g/t 
Au cutoff 
 
Transitional - distinctly weathered material (cyanide leach recoveries 50-90%), 
0.5 g/t Au cutoff 
 
Sulphide - Slightly weathered to fresh material (cyanide leach recoveries 
generally <50%), 0.5 or 1.0 g/t Au cutoff 
 
Ounce - 1 troy ounce = 31.10348 grams 
 
Tonnes - Are estimated on a dry basis and defined as a measurement of mass equal 
to 1000kg which is equivalent to 2204.622 pounds. 
 
Tuff - A rock composed of pyroclastic materials that have been ejected from a 
volcano. In many instances these fragments are still hot when they land, 
producing a "welded" rock mass. 
 
Mineral Resource estimate - An estimate of tonnage and grade (mineral content) 
of a deposit by a variety of techniques including geometrical classical methods 
and or geostatistical methods. 
 
Mt - Million Tonnes 
 
Moz - Million Ounces 
 
Andesite - A fine-grained, extrusive igneous rock composed mainly of plagioclase 
with other minerals such as hornblende, pyroxene and biotite. 
 
Ordinary kriging (OK)  - is a geostatistical approach to modeling. Instead of 
weighting nearby data points by some power of their inverted distance, OK relies 
on the spatial correlation structure of the data to determine the weighting 
values. This is a more rigorous approach to modeling, as correlation between 
data points determines the estimated value at an unsampled point. 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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