core sector communique

LGL reports 57% jump in underlying profit

 

Global gold producer Lihir Gold Limited (LGL) delivered record underlying profit* of US$290 million for the year ended 31 December 2009, up 57% on the prior year (2008: US$184 million).

 

The strong result was due to the group achieving the major milestone of producing and selling more than 1 million ounces of gold in a year, combined with reduced unit costs and strong gold prices.

 

Revenues rose 45% to US$1.09 billion, driven by a 30 percent increase in gold sales volume to 1.11 million ounces of gold and a 12% rise in realised gold price to $956 an ounce. Cash flow from operations more than doubled to US$451 million, up from $208 million in the prior year.

 

Total cash costs declined from US$400/oz in 2008 to US$397/oz in 2009, as a result of tight cost control and increased output, which enabled expenses to be spread across a higher production base.

 

The statutory result was a loss of US$234 million after tax, following the impairment charge and operational losses totalling $413 million associated with the write down the Ballarat assets, as previously announced in the first half of 2009.

 

A final dividend of US1.5 cents per share was declared, following the interim dividend of US1.5 cents per share paid in November.

 

LGL CEO Phil Baker said a record performance from the Lihir Island operation in Papua New Guinea and a full year’s contribution from the Bonikro and Mt Rawdon assets acquired in mid-2008 had enabled the solid underlying profit result.

 

“The excellent production outcome of 1.12 million ounces for the year, together with rising gold prices, translated into record revenues for the company. For the first time in LGL’s history, total revenues surpassed US$1 billion,” he said.

 

“The record performance at Lihir Island has confirmed the significant progress we’ve made in our drive for operational excellence and cost competitiveness. Also, the benefits of the very successful Equigold acquisition are flowing through, with Bonikro and Mt Rawdon contributing 23% of group gold output in 2009 and generating US$147 million of the record mine EBITDA of $634 million recorded for the whole LGL group in 2009.”

 

In 2010 group-wide gold production is forecast to be in the range of 960,000 – 1.06 million ounces. This will include between 770,000 and 840,000 ounces from Lihir Island, approximately 110,000 – 130,000 ounces from Bonikro and 80,000 – 90,000 ounces from Mt Rawdon.

 

Group total cash costs are expected to be below US$450 an ounce in 2010, with costs at Lihir Island and Bonikro expected to be less than US$420 an ounce.

 

“Entering 2010 LGL is financially sound with a robust balance sheet to underpin our expansion projects and borrowings of just US$50 million. We are also completely unhedged, enabling us to take full advantage of the rising gold price,” Mr Baker said.

 

“As the Million Ounce Plant Upgrade expansion at Lihir Island and the feasibility study to expand Bonikro proceed on schedule, LGL is on track to increase production by 30% to 1.3 million ounces by the end of next year.”

 

* Profit after tax before non-cash hedging losses and non-recurring items including discontinuing operations and associated derecognition of tax losses.