Lihir Gold Ltd. announced on Friday that the company has agreed to sell its Ballarat mine in Victoria to Castlemaine Goldfields Ltd. Lihir has stopped all the production in Ballarat mine as the mine was too expensive for Lihir to operate.

Lihir first announced its intention to offload the mine in July last year, while the company found Ballarat mine a technically difficult project. Finally Lihir decided to sell the poorly performing mine to Castlemaine Goldfields. Castlemaine will take the possession of Ballarat mine in early May this year.

According to the agreement, Lihir will get A$4.5 million in cash, and a 2.5% royalty interest in any future production capped at A$50 million.

However, Castlemaine said that the company will immediately cease mining and processing in Ballarat mine and take the operation forward as an exploration project.

"The company had planned about nine months of exploration at the Ballarat mine after taking possession in early May," said Gary Scanlan, chief executive of Castlemaine.

On the other hand, Lihir said that the company would maintain all its focus on the prolific Lihir Island operations in Papua New Guinea and the Bonikro mine in Cote d'Ivoire. In these two operations, the production is rising very sharply and also the exploration potential in these mines is found strong.