In the last decade of precious metal exploration, several important gold discoveries have conclusively demonstrated that epithermal gold deposits formed in what were once active geothermal areas. A significant deposit in this category is the Lihir Island discovery in the Tabar-Ferri volcanic island arc off the coast of New Ireland, Papua New Guinea. Within that arc are the Feni Islands where exploration by Esso PNG Inc. and City Resources Ltd. has been carried out since early 1984. On Ambitle Island in the Feni Group, an epithermal gold prospect located within a young caldera has been tested by diamond drilling. The drillholes intersected a boiling zone at depth beneath acid altered 'cap' rocks. The zone is 30-60 metres thick and comprises hydraulically fractured and mineralised lavas with gold grades of 1-7 g/t. The prospect is still an active geothermal area with current boiling in the zone tested. As on Lihir, the recent epithermal alteration and mineralisation overprints a relict prophyry system. On Ambitle and the adjacent Babase Island several other, cooler exciting gold prospects are currently being tested.