The Lihir gold mine is situated in the Kapit-Ladolam area of Aniolam Island, the largest island within the Lihir group. Unlike many other mining districts in PNG, Lihir does not have a history of alluvial gold mining.
Gold traces were initially discovered during a geological survey of PNG conducted by the Bureau of Mineral Resources between 1969 and 1974. The results fuelled great expectations for substantial gold reserves on Aniolam. The report identified hydrothermal alteration and thermal activity on Aniolam, suggesting the possibility of an environment favourable to epithermal gold mineralisation.
In 1982, prompted by these promising projections, Kennecott Explorations Australia and its joint venture partner Niugini Mining Limited employed geologists Peter Macnab and Ken Rehder to conduct sampling work on the islands which identified the potential for more extensive exploration. Rock chips taken off the sacred Ailaya rock in Luise Harbour yielded samples which averaged 1.7 grams of gold per tonne. Based on these results, Kennecott lodged an application for an Exploration Licence which was granted in 1982. Drilling commenced in the coastal area in late 1983, and continued into the adjacent Lienetz area through 1984. By the end of that year, the presence of a large gold resource had been confirmed.
Between 1985 and 1987, areas of anomalous soils in upper Ladolam Creek were sampled for gold, revealing the huge potential of the deposit. Drilling intersected gold values averaging 6 grams per tonne at intervals down to 197 metres below the surface. When the hole was deepened, a further 42 metres of gold mineralisation, averaging 3.92 grams per tonne, was intersected between 230 metres and 272 metres. This prospect was named the Minifie area and became the focus of diamond drilling throughout 1987. Further exploration defined several other adjacent and partly overlapping ore deposits, referred to as the Camp and Kapit areas. Kennecott engineers completed the first full feasibility study in 1988, but this failed to prove the economic viability of the project. In 1988, Rio Tinto Zinc (now Rio Tinto) acquired Kennecott from BP Minerals America and took over as the joint venture partner with Niugini Mining Limited.
Following the submission of a final feasibility study to the PNG Government in 1992, and extensive community consultation, including detailed social and economic impact and baseline studies, between 1986 and 1994, the Joint Venture was issued with a Special Mining Lease (SML) on 17 March 1995. The lease is valid for the term of the company’s Mining Development Contract — a period of 40 years.
In June 1995, Lihir Gold Limited (LGL) was incorporated in PNG for the purpose of acquiring formal ownership of the project from the Lihir Joint Venture. Four months later, on 9 October 1995, the initial public offering of shares was made. Lihirians secured 20 per cent of the overall 2 per cent royalty rate, and a 15 per cent equity stake through Mineral Resources Lihir Pty Ltd. Construction began in 1995, and by 1997 the processing plant at the Putput site was complete and the mine celebrated its first gold pour on 25 May 1997 at exactly 1.20 pm.
Between 1997 and 2008, the annual gold production increased from 232 697 ounces to over 700 000 ounces. The project was initially operated by the Lihir Management Company (LMC), a wholly owned subsidiary of Rio Tinto, but the management agreement was terminated in October 2005 when Rio Tinto sold their 14.46 per cent share in LGL for A$399 million, in a decision to relinquish minority positions in other listed companies. Lihir Gold Limited itself became the operator, and by 2009, LGL was operating mines in PNG, Australia and the Ivory Coast in West Africa, and was producing a total of more than one million ounces of gold each year.