Lihir Gold says June quarterly production is in line with guidance and up 6% on the march quarter, but off 17% from the same quarter of 2009 because of flooding in Africa.

The company told the ASX yesterday in its second quarter production report that output fell to 243,925 ounces in the three months ended June 30, compared with 294,024 ounces a year earlier.

Production at the company's main mine on Lihir Island in Papua New Guinea was 196,925 ounces, compared with 219,436 ounces a year earlier.

Production at Bonikro in Côte d'Ivoire was down 48% to 22,510 ounces because of the weather problems.

"The feasibility study examining the expansion of the Bonikro project continued during the quarter, and is now due for completion by the end of March 2011," Lihir said.

"A new resource estimate for Bonikro and Hiré has been delayed to the end of this year, following delays in drilling due to lack of drill rigs in the country.

"The Bonikro expansion involves the development of satellite mines at Hiré, around 10 kilometres from the existing pit, to support an expansion in the plant from 2.0mtpa to 3.5mtpa.

"This will lift production to approximately 200,000 - 250,000 oz per year from 2012.

"Production for the first half at Lihir Island totalled 377,000 ounces, and the increasing quarterly production trend should continue into the second half, driven by higher grade from the pit. Full year guidance for Lihir Island remains unchanged at 800,000 - 870,000 ounces," Lihir said yesterday.

"The process plant expansion project at Lihir Island remains within budget and on schedule for completion in 2011.

"In Australia, the Mount Rawdon operation in Queensland produced 24,000 ounces in the three months to June, which was higher than the previous quarter due to increased plant throughput, following the scheduled shutdown in the first quarter.

"Full year production is expected to total between 90,000 - 100,000 ounces."

Gold prices hit a record of $US1,256.80 an ounce during the quarter, but have since fallen by around $US90 an ounce, most of it in the past three weeks.

"The second quarter of 2010 was a solid quarter for the company, with production on track to meet full-year guidance, and good progress achieved in the development of the expansion projects at Lihir Island and in Côte d'Ivoire," Managing Director, Graeme Hunt, said in yesterday's statement to the ASX.

Lihir shares fell 3c to $4.06 yesterday.

The company said its planned merger with Newcrest Mining is proceeding as planned.

"In the coming months, LGL is well placed to complete the merger with Newcrest, creating a strong and vibrant gold major with a first class portfolio of producing mines and an exciting growth profile," he said in a statement.

The company said its total cash costs for the June quarter were $US461 per ounce, down 11% on the prior quarter.

"Gold sales totalled 269,000 ounces for the quarter, which was up 35% compared with the three months to March.

"The increase was due to timing of sales and movements in inventory. The average realised cash price was up 7% to a record $US1191/oz.

"In absolute terms, total cash costs reduced by 5% from the first quarter, to $112 million.

"Increased production in the current half will lead to further reductions in unit costs, which are expected to be below $450/oz for the full year.

"LGL remains on track to produce between 1-1.1 million ounces of gold in the full year 2010.

"This will include production of 800,000-870,000 oz from Lihir Island, approximately 100,000-110,000 oz from Bonikro and 90,000- 100,000 oz from Mt Rawdon.

"Total cash costs for the year are forecast to be below $450/oz, with total cash costs at Lihir Island to be below $420/oz.

"Total cash costs at Mt Rawdon and at Bonikro are forecast to be between $550-$575/oz."