Monthly Archives: February 2013

The high-stakes world of Papua New Guinea mining

Ian Bickis* | The Northern Miner

Rising out of the sea at the collision of the Pacific and Indo-Australian tectonic plates, Papua New Guinea is the stuff of legend for both its geological potential and punishing working environment.

For miners and explorers, PNG has long presented a tough trade-off between the two, requiring major commitments to access the rich deposits.

In the early 1930s the rugged island was the site of the world’s first major air-supported mining project, when Canadian miner Placer Development used modified Junkers planes to fly in dredge equipment to its Bulolo gold project. With individual payloads of less than 3 tonnes, the Junkers hauled in almost 36,000 tonnes of gear. The determination paid off, with the company pulling out some 1.3 million oz. gold from the river over the next 10 years.

Fast-forward to today and logistics is still one of the biggest barriers to operating in PNG. The whole country has about 3,000 km of paved roads, plus roughly 6,000 km of dirt ones in varying states of repair. (Compare that to Sweden, which has 573,000 km of roads squeezed into the same-sized country.)

The PNG government is aware of the barrier, with Prime Minister Peter O’Neill committing to improve the transportation network in a speech to Australia’s National Press Club last year.

“One of our greatest needs is to repair, upgrade and most certainly expand our economically vital infrastructure,” O’Neill said.

But the lure of riches has been a strong motivator for miners to overcome such challenges independently and develop some of the world’s biggest deposits. These include epithermal deposits like Newcrest Mining’s Lihir mine, which has already produced 9 million oz. gold and still has 33 million in reserves, and Barrick Gold’s Porgera mine, which has produced over 17 million oz. gold and has over 6 million oz. in reserves.

The copper-gold porphyry systems are equally impressive, with the Wafi-Golpu joint venture between Newcrest and Harmony Gold sitting on 28.5 million oz. gold and 20 billion lb. copper; Xstrata’s Frieda River project hosting 14.8 million oz. gold and 20.7 billion lb. copper; and the Ok Tedi mine, now owned by the PNG government, already producing over 11 million oz. gold and 27 billion lb. copper since 1984, with years of mine life left.

Numbers like these put PNG as the third most geologically prospective place on earth in the Fraser Institute’s 2012 annual mining survey, at least when setting aside regulations and land-use policies.

The huge, untapped potential is what drew Marengo Mining) to the country in 2005.

“It was really just born out of looking for an opportunity for a junior company to do something quite exciting and have a project of significant value,” Dean Richardson, Marengo’s investor relations representative, said by phone.

In a few years the company has turned its Yandera copper-gold-moly project into a 4 billion lb. copper resource, with 486 million measured-and-indicated tonnes grading 0.37% copper. Marengo plans to release a feasibility study on the well-advanced project in March, with a development capital expenditure of around US$1.8 billion and anticipated annual production of 200 million lb. copper.

“We’re talking about a project somewhere around 30 million tonnes per annum. It really is a project that a number of medium- to large-size companies would be happy to get their hands on,” Richardson says.

Marengo has several years on PNG Gold, which only started exploring in the country in 2011. But already PNG Gold has pulled some intriguing gold hits, and it plans to have a resource out later this year. Results from the company’s Imwauna project, sitting on an island just off the southern tip of PNG’s mainland, include 6 metres grading 111.97 grams gold per tonne, 4 metres of 49.86 grams gold and 6 metres of 36.16 grams gold.

The company found it rough-going at the start with slower-than-expected drilling, but it is now managing 4,000 metres a month with four of its own rigs, and is well on its way to a resource.

“We had some real teething pains at the beginning,” PNG Gold president Neil Halldorson says.

He adds that the company has had to carry a lot more spare parts and be careful about planning heavy equipment moves, as poor planning with either can set a project back.

“Over time we’ve learned to work with those issues, and with every month we get better at it,” he says.

But Halldorson embraces the challenge, because it keeps a lot of competing juniors away and gives any company that can overcome these challenges a real advantage.

“There are very, very few juniors in Papua New Guinea, and a good deal of that has to do with cost and logistics, and everything else. So it really does act as a barrier,” Halldorson says.

Explorers WCB Resources and Vangold Resources have also made an entrance, with active exploration programs in the country.

But some haven’t fared so well with the high costs, with New Guinea Gold shuttering its small Sinivit gold mine last year after it ran out of money. The company is trying to get itself going again, but with its shares trading at a penny, raising money isn’t easy. Papuan Precious Metals, hovering around 2¢, has also struggled in the country.

Size helps when developing projects in PNG: Newcrest and Harmony are running the Hidden Valley gold-silver mine despite a few operational issues; Metallurgical Corp. of China opened its Ramu nickel-cobalt mine last year despite years of environmental delays; and Newcrest is finishing up a US$1.3-billion expansion of its Lihir mine to expand designed output to a million oz. a year after spending A$9.5 billion buying the mine in 2009.

These projects, plus Exxon Mobil’s US$19-billion natural gas project, have helped keep PNG’s economic growth rate at close to 8% for the past decade.

And while growth has been strong in recent years, the country could see much more investment, thanks to sizeable projects in the pipeline. Australian bank ANZ released a study estimating that PNG’s natural resource sector, including mining, oil and gas, could quadruple by 2030, with some US$25 billion in annual export revenues, or as much as US$38 billion, using more optimistic assumptions. Achieving such an increase in output would require US$130 billion in capital investment.

But those estimates rest on projects going forward, even as several major miners have signalled plans to exit PNG, as companies worldwide look to contain costs and focus on core assets.

In mid-2012, Xstrata signalled its intention to offload its Frieda River project, while a feasibility study on the project at the end of last year added US$300 million to project capex, which totalled US$5.6 billion. In 2011, Inmet Mining bowed out of PNG after selling off its 18% interest in Ok Tedi Mining for US$355 million.

On a smaller scale, Newmont Mining told its junior partner Triple Plate Junction that it would end its search for big porphyry systems at Morobe after spending US$15 million to earn 75% of the project.

And Barrick informed joint-venture partner Coppermoly in mid-2012 that it was looking to sell its 72% stake in three tenements after spending US$22 million to earn-in on the properties.

And some smaller skirmishes with companies may make others wary of PNG. Last year Aldridge Minerals pulled out of PNG after the government declined to renew the junior’s Kili Teke copper-gold licence. And more publicly, Nautilus Minerals  has been stymied in its efforts to advance the world’s first major deep-sea mining project after getting embroiled in licensing and financial disagreements with the government. The company suspended construction of the $450-million project late last year.

While cost and operational risks worry some, mining analyst Cathy Moises of Evans and Partners, who tracks several operators in the country, said by phone that:

“as long as you do your groundwork in PNG, you’ve got the locals on side, and have done things the right way — then it’s actually a very good place to work.”

Good relations with locals are important in PNG, as landowners control 97% of the country, and there are no large tracts of government land.

Companies big and small have had trouble with landowners, with Barrick’s Porgera, Newcrest’s Lihir mine and New Guinea Gold’s ailing Sinivit mine all shut down by locals last year.

But Moises downplays the problems with landowners.

“It’s not a major issue. If the mine is shut down it’s usually short in duration, and minor,” she says. “PNG tends to be fairly stable.”

Moises still likes what she sees in PNG, even if it’s a country that doesn’t give up its deposits easily.

“I still think there are some big projects to be found. The terrain and working over there is difficult, so it certainly hasn’t had the attention of some other countries where it’s nice and flat, and you’re much closer to civilization.”

*Ian Bickis is a freelance writer and multimedia editor based in Southeast Asia, and a former staff writer at The Northern Miner. He can be contacted by email at ibickis@gmail.com.

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Bougainville Mining forum updates leaders

Winterford Toreas | Post Courier

THE 2nd regional forum concerning the possible reopening of the Panguna Mine in Central Bougainville is currently underway at the Hutjena Secondary School Hall in Buka.

The forum, which was officially opened by the ABG President Chief Dr John Momis was attended by participants from the four districts of Selau/Suir, Tinputz, Kunua and Torokina Districts in Bougainville.

ABG Ministers Michael Oni (Mining), Rev. Joseph Nopei (LLG and Media Communications) and constituency members from the above four districts were also present during the forum.

The forum started on Monday and ended yesterday, and is aimed at engaging and updating various stakeholders and the wider community in the above districts on the progress of preparing the ABG and the landowners to participate in negotiations.

This forum will also be used to gauge the views of people in these four districts regarding the possible reopening of the Panguna Mine.

Before officially opening the forum, Mr Momis said many people always get worried about the outcomes, without thinking about the process to achieve these outcomes.

“When people are worried about the outcome, I say to them ‘do not worry about the outcome, worry about the process.’ Get the process right and the outcome will be delivered,” Mr Momis said.

Mr Momis also pointed out during his speech some of the decisions and processes which had led to the outbreak of the Bougainville crisis, saying that if there were proper consultations with the landowners and the wider communities this crisis would not have happened. He then said that the reopening of the mine would successfully take place following  proper consultations being carried out.

The President also added that the ABG believes in consultative and conceptual approaches to
decision making between the landowners, and stakeholders and the ABG.

The forum is spearheaded by the Office of the Director for Panguna Negotiations and will be facilitated by the ABG Mining Department, Division of Law and Justice and the Office of Panguna Negotiations.

The first regional forum was held in November last year and was attended by various stakeholders from Buka, Nissan and the  Atolls districts in North Bougainville.

Many of those that attended the first forum had expressed that they supported the idea of re-opening the Panguna Mine. This was because they saw that once the mine is reopened, it will help generate revenue for Bougainville.

Consultations with the mine affected and impacted landowners and other stakeholders like the former combatants have also been completed.

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Resource owners adamant to have input in PNG’s Panguna plans

Radio New Zealand

A representative of resource owners in the Panguna region of Papua New Guinea’s Bougainville says they want to ensure they have control of the province’s new mining policy.

The deputy head of the Bougainville Resource Owners Representative Council, Chris Damana, says this week’s forum in Buka is invaluable for airing concerns about a possible re-opening of the huge moth-balled mine.

He says they have been critical of Canberra’s apparent involvement in drawing up the province’s new mining policy which he says brings back memories of what happened more than 40 years ago when the controversial mine was started.

But Mr Damana says the resource owners have been assured it is only a draft and they will have input.

“We, the resource’s owners are trying to take some control on this. I mean we want to make this mining policy as ours, because it will bless us or it will affect us in the future.”

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US giant using SOPAC and illegal Fiji regime to access seabed minerals in international waters

The illegal government in Fiji is being squeezed by the American corporate giant, Lockheed Martin, to sponsor its search for seabed minerals in international waters. To that end, Lockheed is pushing the Fiji regime to fast track legislation and is being assisted in this endeavor by the Deep Sea Minerals Project (run by SOPAC,  part of the Secretariat of the Pacific Community) and its British lawyer, Hannah Lily.

Fiji’s cabinet is expected to approve a new Decree on seabed mineral management by March the 5th. Consultation on the draft Decree has been fast tracked with relevant stakeholders given less than 3 days to make submissions whilst US giants Lockheed were consulted well in advance.  The new law is required before Lockheed will enter into a formal joint-venture with the Fiji regime. Lockheed will then apply in April to the International Seabed Authority for a new exploration licence.

The new law, which SOPAC, has assisted in drafting, makes vague statements about applying a precautionary approach and best environment practices and requiring Environment Impact Assessments but without specifying where or how Fiji is suddenly to get the expertise to manage and enforce these.

Lockheed has already been granted approval by the International Seabed Authority to explore for polymetallic nodules in one area in partnership with the UK government. It now wants to join Fiji as its official national partner for further exploration licences – but first Fiji needs to have the necessary laws to allow seabed mining in place.

The proposed legislation covers the various aspects and issues arising out of experimental seabed mining operations, including establishing a regulatory authority within Fiji, and introducing a licensing regime, provisions on the protection of the marine environment, and delineating Fiji’s and the company’s duties and responsibilities.

Hannah Lily, employed as a legal adviser by SOPAC, seems to have been advising on the drafting process directly on behalf of Lockheed (LH). Here are some of her comments on a draft version of the new law:

  • “LH would not accept the jurisdiction of the courts of Fiji, in case of dispute. The sub-contract would specify that the parties would be subject to UK law and courts. LH therefore suggest section 14 be deleted to avoid confusion. However UNCLOS Art 235 requires that: “States shall ensure that recourse is available in accordance with their legal systems for prompt and adequate compensation or other relief in respect of damage caused by pollution of the marine environment by natural or juridical persons under their jurisdiction”. the ITLOS Advisory Opinion summarises this as ‘requiring the sponsoring State to establish procedures, and, if necessary, substantive rules governing claims for damages before its domestic courts’. Whether the proposed Fiji / LH model can navigate this requirement and LH’s requirement for UK arbitration remains  a point to be explored”
  • “LH consider it unfair both to be charged the admin fee and to require the Company to cover its application costs. They suggest it should be one or the other, not both.  “LH would expect a standalone non-disclosure agreement to cover Fiji’s handling of their commercial data”
  • “Query whether there is a reason Fiji would like this notice period to be so lengthy? LH would prefer this to be shorter, or if that is not possible to clarify that they would not be penalised for failure to conduct activities during that 6-month notice period”
  • “LH request to delete, otherwise Fiji could unilaterally revoke the licence after 2 years’ inaction, which creates too great an uncertainty for the company”
  • “LH request that  these specific figures are removed from the Decree and replaced with a provision permitting  the Government to negotiate financial terms in a Sponsorship Agreement. NB The suggested fees are too high for LH. The UK rates (GBP 10k for application, 15k for first year, 25k after 6 years , 25k on each extension), which use an actual cost recovery mechanism would be more feasibl for LH –  perhaps with some small room for negotiation, given that this  is a developing country”
  • “LH would require that the contract stipulates the UK as the prevailing law and dispute resolution mechanism”

The International Sea Bed Authority (ISBA) which regulates the leasing of seabed deposits have not yet developed a mining code to regulate the exploitation of minerals in international waters.  NGOs have raised serious concerns about the experimental nature of the industry as well as its relevance as a development option for island nations.  In addition NGOs have raised concerns about the need to protect the marine environment, prevention of pollution from seabed activities and whether states such as Fiji have the ability to monitor the environment impact.

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New Dawn updates from Second Panguna Forum

SECOND FORUM OPENS

Aloysius Laukai

The second forum on Panguna negotiations for North Bougainville, that covers Bougainville mainland from Tinputz, Kunua, Kereaka,Selau and Suir officially opened this morning at the Hutjena Secondary School hall on Buka island.

The first forum was held last year at the same location but covered areas in North Bougainville starting from Tasman islands, Nissan district, Atolls and Buka district.

The aim of all these workshops is to gauge the views from all Bougainvilleans on the upcoming Bougainville Copper Agreement negotiations.

Other districts that are yet to stage these forums are Buin and Bana in South Bougainville and Panguna and Kieta district in Central Bougainville which are scheduled for March this year.

In his welcome remarks this morning, the ABG Mining Minister, Michael Oni said that it was an opportunity again for all stake holders to meet and discuss issues affecting the region today in terms of the Panguna negotiations.

The meeting is being attended by leaders from both the Mekamui faction led by its President Philip Miriori and his deputy Philip Takaung and other leaders from Central Bougainville.
ABG President Dr John MomisS is also attending this forum with ABG Ministers and members of ABG.

The two-days forum will end tomorrow afternoon.

OPENING DEBATED

Aloysius Laukai

There are interesting debates coming out from the second mining forum on the future of the Panguna mine, one of which included the President of the Mekamui Government of Unity, Philip Miriori who has commented that at present he opposes the reopening of the Panguna mine until and after all outstanding issues amongst the Panguna landowners and the people of Bougainville are sorted out.

Mr. Miriori said that there are alot of issues that needs to be addressed before the Panguna mine can be re-opened.

His presentation was supported by his deputy Philip Takaun, Lyned Ona and Lord Blaise Iruinu.

All the ABG members who did their presentations all called on the people of Bougainville to complete all outstanding issues and look at the economy that was not able to sustain the Autonomous arrangement which Bougainville is entangled in.

The members that talked this morning were the Member for Torokina, Steven Suako, the member for Suir, Luke Karaston and the member for Taunita Teop MICHA MOSE.

Mr. Mose said that if Panguna is difficult to address then the ABG must fast tract its policy on mining so that other areas can open one mine to support the economic recovery efforts of the ABG.

LERA WANTS PEOPLE’S PARTICIPATION

Aloysius Laukai

The Regional Member for Bougainville, Joe Lera wants Bougainvilleans to unite and discuss the economic recovery of Bougainville.

He made these remarks at the second forum that is discussion the future of the Panguna mine in Buka today.

MR. Lera also praised the ABG for initiating the forum which has gathered all factions of the Bougainville conflict to come and discuss important issues that continues to affect the development of the region.

The Regional member said that it was healthy for the people to debate issues that continues to disturb the peace process.

Mr. Lera also announced that he has already established education institutions on Bougainville starting this year to train Bougainvilleans to work if the mine or any other big business activities resume on Bougainville.

The Regional member said that the Prime Minister of PNG, Peter O’Neil was very supportive of the rebuilding process on Bougainville.

He also announced other projects that could be developed to help support the economy of Bougainville, with projects like Tourism, Education programs, Fisheries and other activities.

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Australia warned to stay out of Bougainville affairs

PACNEWS

Former Bougainville Revolutionary Army commander Sam Kaona has warned Australia not to meddle in Bougainville affairs.

He said the first policy draft on mining in Bougainville was no different from the colonial policy that caused the crisis.

“The Australians have taken control of mining policy in Buka and the first policy draft by ABG legal unit headed by Tony Regan is no different from the previous policy,” Kaona, who is chairman of the recently formed Bougainville Resources Owners Representative Council, said.

He added that the proposed policy, sponsored by AusAID and drafted by Regan, risked Bougainville’s first constitutional crisis.

“Since the constitution is the supreme law of Bougainville, section 23 of the Bougainville constitution, which restores ownership of resources on Bougainville to the customary landowners, is the only option that is constitutionally legal.

“So any attempt to impose any other resource ownership system would be invalid and ineffective – they are risking a constitutional crisis.”

Resources rights activist Simon Ekanda shared similar sentiments.

“Bougainville mining policy does not belong to Regan, BCL (Bougainville Copper Ltd) or the Australians, it belongs to the resource owners and the people of Bougainville.

“This is to be a Bougainville mining policy written by Bougainvilleans in Bougainville for the Bougainville resource owners and people.

“

Section 23 of the Bougainville constitution returning the resource ownership to the customary landowners is to be the foundation of that policy.

“Let me be absolutely clear – there will be no compromise on this.

“The Panguna landowners must determine that their interests will be best served by securing a special mining lease over their resource and then to entertain qualified mining companies with the view to putting Panguna back into production.

He also cautioned ABG President John Momis to be careful with the new mining policy.



“Both PNG and Bougainvilleans have died and it is unwise if Momis allows colonial administrators to rewrite Bougainville mining laws.”.

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CLRC asks: ‘Should river and marine tailings dumping be banned?’

PNG to canvass views for mine tailings law

Radio New Zealand

Officials from Papua New Guinea’s Constitutional and Law Reform Commission will be interviewing people most affected by the practise of marine disposal of mine tailings in order to help formulate a law.

Despite ongoing calls from locals to regulate the practice, PNG still has no law on mine tailings.

The commission is still reviewing environment and mining laws, but its secretary Dr Eric Kwa says it also wants to prioritise consultations with communities near various mining sites.

“Two of the questions that we are asking is that the first one is should mine waste tailing into the river system be banned in Papua New Guinea. And the other one is should mine tailings dumping in the sea be banned. So those are straight forward questions that we’re after. So it’s a bit of a challenge for us, but we’ll get there somehow.”

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