October 29, 2009 07:16am
LIHIR Gold is initiating dividend payments for the first time since 2003 on the back of boosted gold reserves at its flagship mine.

Lihir hasn't paid a dividend to shareholders since 2003, and a spokesman for the company said the payment reflected the improving outlook for the company and that it expects to be able to maintain payouts at similar or higher levels in the future.

Goldman Sachs JBWere analyst Ian Preston said that while dividend payments had been expected in the future, no one had been expecting them to begin this soon and that the payment highlighted Lihir's strong financial position.

"It means that they are comfortable looking at their expansion plans, which are fully funded out of their facilities and their cash, and that they are in a position to be able to look at retuning something to shareholders," he said.

The Port Moresby-based miner also announced it has boosted reserves at Lihir Island by 7.5 million ounces, taking total ore reserves at the mine to 28.8m ounces as at June 30.

The reserves upgrade, which analysts described as "material", is based on the incorporation of drilling results, refinements to the planned expansion of the mine and an increase in the company's long-term gold price assumption to $US800 ($888m) an ounce from $US675m previously.

The miner's total gold production for the third quarter was 233,346 ounces, down 21 per cent on the 294,024 ounces produced in the second quarter, due to lower output at Lihir Island as a result of planned maintenance work.

Mr Preston said the maintenance work had been well flagged to the market and that gold production for the quarter had come in ahead of expectations.

Read more at The Australian