Lihir Gold Ltd

Lihir Gold Limited (Australia, Nasdaq:LIHR) mines in Papua New Guinea. Lihir produced 651,000 oz of gold in 2006. A merger between Lihir Gold Limited and Ballarat Goldfields NL, with gold projects in Australia, was completed on 8 March 2007.

Lihir Gold stock price plunges

Lihir rattles investors with a production downgrade, and it’s not the first one in 2007.

Author: Barry Sergeant (Mineweb)
Posted: Friday , 14 Dec 2007

JOHANNESBURG -

Lihir (LGL AU, A$3.47 a share), which has sometimes topped the 2007 ladder of performance among global Tier I gold stocks, this week dropped a bombshell production downgrade, triggering an 11% decline in its stock price over Thursday and Friday. Initial production guidance of 800,000 to 830,000 ounces for calendar 2007 was already cut, in October, to 750,000 ounces. The latest guidance has lowered 2007 production to 700,000 ounces.

A note from RBC Capital Markets describes the latest production downgrade as a "disappointment within three weeks of an analyst site visit, which we attended". The latest downgrade is seen as underscoring the risk that has emerged in Lihir this year.

The latest reduced guidance from Lihir is put down to several unforeseen factors, not least current mining of harder ore, resulting in lower plant throughput. Blending of hard ore with softer ore has produced lower grades of 4.4 grams a ton, against an expected ~6 grams a ton. Equipment failure in Lihir's new oxygen plant has also undermined production. None of the issues are likely to be resolved soon.

Lihir Gold operates one of the world's largest gold mines and processing facilities on the island of Lihir, 900km north-east of Port Moresby in the New Ireland province of Papua New Guinea. The Lihir ore body is substantial and rich by global standards, with an estimated 40m ounces in resource including 23.6m ounces in reserves.

Over the past two months, Newcrest (NCM AU, A$33.25) has generally been favoured above its Australian peer. However, the past two days of turmoil have not only seen the Lihir stock price plunge, but switching into Newcrest has seen it take leadership of global Tier I gold stocks. There is an element of déjà vu here, given the now-historic two years of production downgrades from Newcrest.

Tier I gold stocks
	Stock	From	Value
	price	high*	US$bn
Goldcorp	$32.63	-14.4%	23.03
Harmony	$10.15	-39.2%	4.06
Lihir	A$3.47	-22.0%	5.82
AngloGold Ashanti	$43.64	-12.5%	12.11
Barrick	$38.22	-19.9%	33.20
Newcrest	A$33.25	-7.3%	13.26
Gold Fields	$15.31	-26.0%	9.99
Kinross	$17.84	-16.2%	10.75
Newmont	$48.82	-13.4%	21.14
Street ETF	$78.50	-6.1%	15.73
Average		-19.0%
* 12-month high