Monthly Archives: October 2012

Experimental seabed mining in focus (Part 1)

What is Experimental Seabed Mining, and what does it mean for Papua New Guinea?

This film provides an overview of the issues and risks involved in Canadian company Nautilus Minerals’ plans to mine the Bismarck Sea.

Featuring prominent academics Prof Chalapan Kaluwin, Dr Ralph Mana and Prof Patrick Kaiku of the University of PNG; and ACTNOW! PNG program manager Effrey Dademo.

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PNG sees only a tiny fraction of enormous Lihir mine revenues

Lihir mass revenue stands at K17 billion

Post Courier

Lihir Gold Mine total aggregate revenue since the start of gold production in 1997 has reached an astounding $US6.1 billion (K17.1 billion), according to statistics released by the Mineral Resource Authority (MRA).

This is good news for Lihir Gold Mine developer and Australia’s largest gold producer, Newcrest Mining Limited, which is poised for another increase in gold revenue over the next five years with 28.8 million ozs in gold reserves and 43 million ozs in measured and indicated resources.

The royalty compensation and other benefits package reached through agreement with the landowners and the government, however, presents a much less favourable picture.

The MRA statistics illustrate that total gold production by Lihir Gold Limited (LGL), Newcrest’s PNG subsidiary, and the revenue from that production have increased very significantly in comparison to the landowner benefits through the Special Support Grant (SSG) and the 2% Royalty payments, from 1997 to 2011. 
Royalties and SSG are two components that make up the Integrated Benefits Package (IBP).

MRA’s statistics reveal that more than 9.5 million ounces of gold has been taken from Lihir Island since the start of operations producing ever increasing revenues for LGL, while only a tiny portion of that revenue has trickled down over the years to the landowners through compensation and other benefits.

Total royalty and SSG payments since the operations commenced amount to only K433 million while the total revenue from the Lihir Gold project over the same period exceeds K17 billion.

MRA’s statistics show annual gold production and sales including the gold price and the revenue from gold sales in US dollars and PNG kina. 
The statistics also show the value of the 2% royalty and the amount of the annual SSG payments, including the cumulative SSG payments outstanding, from June of 1997 up to December last year.
MRA’s statistics reveal that since 1997 Lihirian landowners have received K340 million in total royalty payments and K94.5 million through SSG contributions.

K80 million of the SSG contributions has actually been paid to landowners while K14.5 million is still outstanding.
 This compares with total revenue of K10.6 billion generated by the Lihir gold mine in the last five years. Over the same period the landowners received royalties of K203.7 million and SSG contributions of K27.8 million.

Revenue from the Lihir Gold Mine was K1.2 billion in 2007 and K2.7 billion in 2011 due largely to the increase in gold prices. Over the same period royalty payments increased from K25.8 million to K54 million.

In short, revenue increased by K1.5 billion in five years while royalty payments increased by only K29 million


Filed under Financial returns, Papua New Guinea

St Barbara’s ‘problem child’

Blair Price | Mining News

Macquarie Private Wealth is maintaining an underperform rating on St Barbara on the back of difficulties it foresees with the recently acquired Simberi and Gold Ridge mines.

Analysts from the investment bank toured the former Allied Gold-owned sites in August, and MPW’s views of the Simberi mine in Papua New Guinea have already triumphed over St Barbara’s expectations.

“As part of our recent site visit to Simberi, site management were adamant that the plant expansion was on track for delivery in the December quarter of 2012,” MPW said. 

“In line with our expectations, St Barbara announced that this is now scheduled for completion in the March 2013 quarter.”

The analysts coined the Gold Ridge mine in the Solomon Islands a “problem child”. 

At least one problem was that they missed their September quarter forecast for this mine completely.

In its worst quarterly performance since it was recommissioned last year, Gold Ridge produced 14,079 ounces of gold at cash costs of $A1713/oz compared to MPW’s forecasted 19,000oz production at $1,288/oz.

On the issues that need attention, MPW cited slow development of mining areas, a focus on ore feed at the expense of waste stripping, wet weather access to all mining pits and low recoveries of sulphide material. 

But they also understand it is still early days for St Barbara management.

“During the quarter both of the Allied assets demonstrated just why they will take significant time and effort to reach their potential,” MPW said. 

“That said, we would emphasise that St Barbara only had management of the assets for the last 23 days of the quarter. Clearly this is not sufficient time for changes to be implemented and the resultant operational improvements to be viewed.”

St Barbara shares have fallen 21.5% this week.

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Kula Gold applies for mining lease to become PNG gold producer

Angela Kean | Proactive Investor

Kula Gold is advancing closer to its goal of becoming the next gold producer in Papua New Guinea with the lodging of a mining lease application for its Woodlark Island Gold Project.

The application was lodged with the PNG Government in conjunction with the Feasibility Study and Development Proposal for the project.

With the mining lease application now lodged, Kula Gold can now focus on the pre-construction aspects of the project.

The company is targeting the start of production by the end of 2014.

The recently completed Feasibility Study indicated strong economics for the Woodlark Island Project including a pre-tax net present value of US$237 million, based on a US$1,600 per ounce gold price, and a pre-tax internal rate of return of 34%.

The metrics are based on a 1.8 million tonne per annum gravity and carbon in leach operation with a nine year mine life and total production of 813,000 ounces. 

Operating costs for the first six years have been estimated at US$730 per ounce. 

The Woodlark Island Project currently hosts a total resource of 45.1 million tonnes at 1.5 grams per tonne (g/t) for 2.1 million ounces of contained gold, and ore reserves of 10.4 million tonnes at 2.1g/t for 700,000 ounces of contained gold.

Project finance

Kula Gold is currently assessing its financing options for Woodlark Island.

The company is considering the PNG Government’s option to purchase up to a 30% stake in the project, as well as approaches from a number of banks interested in providing debt financing facilities.

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Big changes coming to PNG Sustainable Development Program if new government has its way

Frik Els |

Radio Australia reports Peter O’Neill, Prime Minister of Papau New Guinea, has demanded that Anglo-Australian giant BHP Billiton grant PNG control over appointments to the board of the PNG Sustainable Development Program Ltd. (PNGSDP).

“I think BHP should take its leave at some stage. I’d rather it be sooner than later. BHP has to learn that it has to move on,” O’Neill said.

PNGSDP was formed in 2002, when BHP Billiton divested its 52% shareholding in Ok Tedi Mining Limited.

PNGSDP currently holds assets worth $1.4 billion including a 63% stake in the massive Ok Tedi copper and gold mine which is nearing the end of its life. The PNG government owns the rest.

PNG Mine Watch reports PNGSDP is considering buying into Xstrata’s Frieda River copper and gold project by bringing the PNG government on board.

Xstrata in June said it was looking for a buyer of its 82% interest in the Frieda River, not saying anything more than the decision is part of an “ongoing review of operations.”

The Swiss miner has spent more than $250 million on the project and is walking away from one of the richest copper-gold deposits on the planet.

Frieda River – described as Ok Tedi “30 years ago” – boasts a resource of about 12 million tons of copper and 18.5 million ounces of gold and is only 70km north of the Ok Tedi mine.

PNGSDP already owns a small stake in Frieda River via its shareholding in explorer Highlands Pacific which it acquired in June this year.

In June-July PNG held its eighth election since independence from Australia in 1975. O’Neil was caretaker PM during the transition.

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Group educates locals on sea mine

The National

The Baining Environment Heritage Foundation is spearheading moves to properly educate indigenous people living around the Bismarck Sea on the implications associated with the Solwara 1 project between East New Britain and New Ireland.

Executive director Alois Balar said the foundation would be educating the people, particularly on technical and legal implications, social and environmental impacts and the climate consequences of the Nautilus seabed mining project.

He said while there were moves by NGOs and civil groups to present petitions to MPs, the people needed to be aware of the technical and legal issues, human rights issues, international treaties and conventions, national environment laws and the environmental and social impacts of deep sea mining.

He said a radio programme, “The Voice”, which involved the foundation and 53 registered fisheries cooperatives, ward councillors, village groups, associations and village people from New Ireland and East New Britain had been having an impact on the populace with feedback and they would use the programme to run their awareness on seabed mining.

He said “The Voice” had arranged for a “radio-a-thon” in the next few weeks to raise funds to carry out awareness in all communities in the two provinces.

“It is our aim to ensure that many people know the importance of their environment.”

He appealed to international donors to support them in carrying out the awareness programme.

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Nautilus dispute settlement now a ‘more remote possibility’

Kalinoe: Nautilus has to settle row

Malum Nalu | The National (aka the Loggers Times)

Petromin chief executive officer and managing director Joshua Kalinoe is waiting for a dispute between the state and Nautilus Minerals to be resolved before Petromin can take a 30% stake in the Nautilus development worth up to US$500 million.

Kalinoe said this yesterday at a luncheon he held with members of the media while refusing to go into details of the dispute between state and Nautilus.

“There’s a dispute between the state and the developer (Nautilus),” he said.
 “Because of that, we can’t do much. We have been nominated (by the state) to participate in the project.
 Until the dispute is resolved, we can’t do much.
 The issue has been disputed by Nautilus, not by the state.
 By doing so, they (Nautilus) are delaying the project, not the state.”

In June Nautilus chief executive Stephen Rogers said that he expects to settle things with Petromin within “months” once the election was over, but that now seemed a more remote possibility.

Nautilus says PNG undertook to help fund the Solwara 1 project  – almost half built –  as part of an agreement signed last year that gave the country 30% ownership, but the go­vernment appears to be digging in its heals over the issue.

In a response in June,  Petromin alleged that Nautilus was the party that breached the terms of the deal and that the state was “therefore entitled to terminate the agreement”.

In late April, Nautilus announced it had signed China’s Tongling Non-Ferrous Metals Group as the first customer for its pioneering PNG sea-floor mine.

The undersea mine was slated to begin production in the fourth quarter of next year, but Nautilus is also facing funding problems concerning its German partner building the US$160 million surface vessel, which is the base for the entire underwater operation. 
Nautilus still has some US$100 million cash in the bank.

Kalinoe, meantime, said Petromin was waiting for the final decision on the Gulf LNG project and the Wafi-Golpu project in Morobe to make final decisions.

“Again, we’re waiting for a decision by state on when the project will get formally off the ground,” he said of the Gulf LNG.

On Wafi-Golpu, Kalinoe said Petromin had been nominated by the state and was doing desktop studies as well as those on technical and economic aspects.

“We’re just waiting for the developer Wafi-Golpu Joint Venture to go through the process and wait for the final decisions,” he said.
 “This is normal.
 The state nominated us through the minister for mining and the minister for petroleum.”

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