NEWCREST Mining takeover target Lihir Gold has taken advantage of the record gold price with gold sales jumping 35% on the previous quarter.

Process plant at Lihir

June quarter production increased 6% but was in line with guidance at 244,000 ounces of gold.

Unit total cash costs fell 11% to $US461 per ounce, improving margins at a time when the gold price rose to an all-time high.

The company’s flagship Lihir Island operation in Papua New Guinea produced 196,925oz gold, a 9% increase on the March quarter.

Improved performance of the mining fleet saw material movement increase 19% to 12.5 million tonnes.

Ore milled decreased 8% to 1.58Mt due to scheduled autoclave maintenance, but grade jumped 16% from 5.01 grams per tonne gold to 5.8gpt gold.

Lihir said it expected the gold grade to increase beyond 6gpt gold for the rest of 2010.

Cash costs dropped $70/oz to $439/oz.

For the first six months of 2010, Lihir Island produced 377,198oz from the milling of 3.3Mt at 5.4gpt gold at total cash costs of $473/oz or gross cash costs of $603/oz.

The guidance of 800,000-870,000oz remains unchanged.

The plant expansion at Lihir Island, which will take production to 1 million ounces per annum remains on budget and is scheduled for completion next year.

The Mt Rawdon mine in Queensland also recorded a 7% increase in gold output to 24,489oz from the processing of 910,000t grading 0.94gpt gold at cash costs of $494/oz.

Rainfall and unscheduled maintenance impacted the Bonikro mine in Cote d’Ivoire, resulting in production of 22,510oz, a 15% drop.

Cash costs also increased 22% to $615/oz.

While the next two quarters are expected to improve, the company has lowered the annual guidance for Bonikro from 110,000-130,000oz to 100,000-110,000oz.

However, the company remains on track to meet its full-year group guidance of 1.0-1.1Moz gold at cash costs of $450/oz.

In the June quarter, Lihir sold 269,172oz gold, a 35% increase on the previous quarter, at a record high average price of $1191/oz.

For the first half of the year, total sales were 468,864oz gold at an average spot price of $1157/oz.

Lihir is in the process of merging with its larger competitor Newcrest to create Asia-Pacific’s largest gold producer.

Shareholders are due to vote on a scheme of arrangement on August 23 and an independent expert last week deemed that the offer was in the best interest of Lihir shareholders.

Newcrest has offered one share for every 8.43 Lihir shares plus A22.5c for each share held.

If shareholders vote in favour of the deal, it is expected to be completed on September 13.

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