Monthly Archives: December 2018

Game Over. Canadian Mining Company’s Papua New Guinea Deep Sea Mining Experiment Fails

MiningWatch Canada  | December 11, 2018

Nautilus Minerals’ aspirations to be the world’s first deep sea mining company sink to the bottom of the ocean on news that the project support vessel critical to the development of the company’s deep sea mining project in Papua New Guinea has been purchased for repurposing by Indian company MDL Energy.

Dr. Helen Rosenbaum of the Deep Sea Mining Campaign said: “Nautilus’ Production Support Vessel was the centrepiece of their model of operation. Without the support vessel it’s difficult to see Nautilus ever developing its Solwara 1 project. Given Nautilus’ dire financial circumstances it is fair to say the game is over. There seems little chance of them re-paying their bridging loans when these become due in less than a month. The Solwara 1 experiment can be deemed a failure, and the people of the Bismarck Sea of Papua New Guinea have hopefully been spared an environmental disaster.”[1]

Dr. Catherine Coumans of MiningWatch Canada stated, “If Nautilus sinks, the amazing hydrothermal vents targeted for mining with their unique and diverse life forms will be given a reprieve, as will the marine ecosystems and fisheries of the Bismarck Sea. Local communities have been fighting hard to preserve their way of life and their livelihoods for their children and children’s children.”

Jonathan Mesulam from the Alliance of Solwara Warriors, added, “My village is located in New Ireland province, only 25 km from the proposed Solwara 1 project. It will be good news for my people if Nautilus goes bankrupt – instead of bankrupting our sea. We will fight this project to the very end.”

Mesulam continued, “The Alliance of Solwara Warriors launched a legal case in PNG’s courts over a year ago.[2] We are concerned that the Papua New Guinean Government has attempted to have our legal case dismissed. We are now talking to our legal team about filing substantive court proceedings against Nautilus and the State to stop the project. One way or another we will chase Nautilus and Solwara 1 from PNG’s waters!”

Sir Arnold Amet, former Papua New Guinean Attorney General, declared, “I have been warning our Government publicly and privately about the financial mess they will find themselves in when this experimental company fails.[3] The PNG Government invested heavily to purchase 15% of Nautilus and this will now translate into 15% of its bankruptcy and any debts the company owes. Our nation cannot afford this. The Government should now terminate the contract with Nautilus and cancel all permits for the Solwara 1 operation.”

Notes
[1] Canadian company Nautilus Minerals Inc. has been desperately seeking funds for its flagship Solwara 1 deep sea mining project. Commercial operation has been delayed year after year since it received its licence to mine the floor of the Bismarck sea in 2011. In a last-ditch bid to finance Solwara 1, Nautilus’s two largest shareholders, Russian mining company Metalloinvest and Omani conglomerate MB Holdings, have formed a new company whose sole job is to secure funding for the Solwara 1 project. However, their attempts have failed. See Nautilus signs funding mandate with major shareholders, Nautilus Minerals press release, 11 October 2017.

[2] Legal action launched over the Nautilus Solwara 1 Experimental Seabed Mine, media release, Alliance of Solwara Warriors and Centre for Environmental Law and Community Rights (CELCoR), 8 December 2017; Troubled Papua New Guinea deep-sea mine faces environmental challenge, The Guardian, 12 December 2017; World-first mining case launched in PNG, Lawyers Weekly, 14 December 2017.

[3] Nautilus Solwara 1 on the verge of bankruptcy as APEC Summit heads to Papua New Guinea, media release, 12 November 2018; Former Attorney General of Papua New Guinea: The writing is on the wall for Solwara 1 – PNG should withdraw its investment before it’s too late, media release, 17 January 2018; http://www.deepseaminingoutofourdepth.org/the-writing-is-on-the-wall-for-solwara-1-png-should-withdraw/;‘Former PNG AG attacks deep sea mining project, Radio New Zealand International, 24 October 2017.

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Petition to Stop the K 5 Billion Ramu Nickel Extension Project and Shut Down of Basamuk Refinery

On Saturday, 01 December 2018, we the landowners and the mine-impacted communities of Basamuk held a public forum at Ganglau Village.  I did education and awareness on:

  • The 2019 Budget, the Medium Term Development Plan III (2018 – 2022) and where Rai Coast is positioned in these plans;
  • The recently held APEC Meetings and some of the decisions that came out of that which will affect the people; and
  • The APEC gift K5 Billion Deal MOU signed on 16 November 2018 between PNG’s Mining Minister Hon. Johnson Tuke and the Chinese Government for Ramu Nickel Extension Project.

Following the forum, 1215 people signed a petition to stop the K5 Billion Extension Project and even shut down the Basamuk Refinery and limestone mine if the Government fails to hear us.  For thirteen (13) years, our voices have not been represented in Parliament and have been suppressed because we’ve been told to raise such issues through our elected MP and the landowners association.  For obvious reasons, our voices get drowned between Cape Righy and Godawan.

This time, with the support of five (5) elected Ward Members, we’ve formed The Basamuk People’s Voice which complements the petition by the four (4) LOAs from Kurumbukari to Basamok.  We have been deprived of our natural justice enshrined in our National Constitution and Directive Principles for far too long.

Our petition is directed to the Minister for Minister for Mining Hon. Johnson Tuke, and copied to the Prime Minister, Hon. Peter O’Neill, Minister for National Planning, Hon. Richard Maru, Governor for Madang Hon. Peter Yama, Minister for Provincial Affairs, Hon. Kevin Isifu, President Ramu Nico Management (MCC) Ltd Mr. Gao Yongxue, and the Chairmen of the 4 landowner Associations from Kurumbukari to Basamok.

OUR PETITION

Dear Honourable Minister,

SUBJECT:  PETITION TO STOP THE K 5 BILLION RAMU NICKEL EXTENSION PROJECT AND SHUT DOWN OF BASAMUK REFINERY

We the landowners and the mine-impacted communities of Rai Coast and Astrolabe Bay Rural LLGs, and particularly the Basamuk landowners, of Rai Coast District of Madang Province hereby present this letter of petition to you as Minister responsible for mining, the Prime Minister Hon. Peter O’Neill, the National Government and the Madang Provincial Government.

During the APEC Summit on 16 November 2018, you signed an MOU with the Government of China, witnessed by our Prime Minister and the President of China, Xi Jinping, for a K5 Billion Ramu Nickel Mine Extension Project deal.

We the people of Rai Coast say NO to the use of our land, sea, rivers, limestone and people for the Extension Project unless our demands are met.

Our people have not benefited from key infrastructures nor socio-economic development for over 13 years since the Chinese first set foot at our doorstep.

We therefore demand the following from the Government:

1.       ROAD (MADANG TO MOROBE BORDER)

We demand urgent and priority funding for the missing link Madang-Morobe Coastal Highway, which will connect Madang to Basamuk and beyond.  In the PNG Development Strategic Plan 2010 – 2030, this area has been identified as one of the 10 economic corridors, with big economic potential but most disadvantaged.

Rai Coast District has huge economic potential in Agriculture, Tourism, Fisheries and MSME.  For example, statistics from Cocoa Board shows that Rai Coast District has the highest number of cocoa fermentries and we produce the most cocoa in Madang Province.  We need this key infrastructure to open up the resource-rich Madang-Morobe coastal economic corridor.

Since PNG joined China’s “One Belt One Road” (OBOR) Initiative, we have seen the Government build massive infrastructures in Port Moresby City.  We have seen Billions of Kina Chinese-funded new road networks in the Highlands, hospitals and agriculture projects.

We the Rai Coast people have been hosting the Chinese for 13 years.  Their State-owned company MCC’s biggest footprint is in our villages, our seas, rivers, and the air.  Yet we have ZERO major high impact infrastructures, the most obvious one being the road.

The sea continue to be the graveyard for hundreds of Rai Coast people.  We continue to take this risk every day.  The District’s social indicators are very low.  Lack of infrastructure, transport and access to energy hinder us from economic participation.

Minister, this time we will not allow any further Extension Project and we will also shut down the refinery if the Government does not start building our road and bridges as of 2019.

2.  ENVIRONMENTAL IMPACT AND ASSESSMENT

We demand an independent assessment by environmental professionals on the impact of the Mine on the people, their livelihood and the environment.  This must not be sponsored by the Company nor done by CEPA, as they have compromised and failed us over a decade.  There is a Court Order for 3-monthly assessments that has never been adhered to.

We demand the Government to immediately review and stop the special permission granted to the company to burn heavy oil for electricity.  We understand this heavy oil is banned in rest of the world.  We demand an urgent independent assessment into the quality of air from sulphur dioxide and nitrogen dioxide air emissions.

We demand the company be held to task to immediately produce hydro-power from the many rivers we have and even serve electricity with the people as per the Government’s rural electrification agenda.

No health baseline study has ever been conducted to date.  Human use of sea and fish tissue is not analysed.  The medical and safety standard of the mine is appalling.

3.  RELOCATION

Permanent relocation of people away from the hazardous refinery area to Yalau Plantation and the development of Yalau Township as one-stop LLG Town and Service Centre for the District.

4.  REVIEW OF FISCAL INCENTIVES

We demand an urgent review and cessation of the fiscal incentives of 10-year tax holiday given to the Developer.  This tax holiday has effectively transferred wealth from Papua New Guineans to China.

The Developer must now pay taxes and this be utilized under Infrastructure Tax Credit Scheme for vital infrastructures like roads, schools, health facilities and Infrastructure Development Grants for the mine-impacted Districts.

5.  ISSUES WITH EXISTING MINING LEASES AT BASAMUK

We have existing issues that the Government and the Developer has failed to resolve.  Some of these matters have been raised by the Four (4) Landowner Associations in their petition of 21 November, 2018 to you.

For Basamuk, notable is the landownership issue which the State’s decision and the Developer’s ignorance has caused.  The Basamuk land dispute was gazetted in the National Gazette in 2001 (G169 of 2001).  The land was exempted from Government’s Compulsory Acquisition process in 2002 (G51 of 2002).  This decision was held by the National Court in 2007.

Both GoPNG and the Developer are illegally operating on our land.

Both GoPNG and Developer did not conduct due diligence to identify the land gazetted as Volume 27 Folio 142, containing an area of 87 hectares acquired for Mining purpose.

This is different to Volume 26 Folio 65, identified by registered survey File No. 12/257 containing an area of 83.989 hectares, erroneously referred to as Mindre Portion 109 that contains the modified survey of Basamuk, which falls short of the original survey.

Mindre and Basamuk are two different lands.  The Government did not properly acquire the land and the documents/evidence we have on hand indicates fraud on the part of the State, contempt of Court and the Developer illegally residing on our land.

We therefore demand the State to immediately look into this matter, have it resolved and pay the parties concerned compensation as stated in Section 53(1) and 53(2) of the Constitution.

We now give the State 10 working days to respond to this petition.  If we do not hear from the State nor get a positive response for further discussions, our next course of action will be to:

(i)       Completely stop any Extension Project.

(ii)      Shut down Basamuk Refinery as it is illegally operating on our land, in contempt of Court.

We are optimistic that the Government will respond favorably to our petition.  We understand the PNG-China relationship and look forward to further dialogue with your Department, the Madang Provincial Government and the State.

…………………………………………….

END OF PETITION

  • Petition letter signed by Chair of The Basamuk People’s Voice – Ms. Kessy Sawang
  • Press Conference on this held in Madang town on Wednesday 05/12/18.
  • Hand-delivered to all parties
  • Chair had good meeting with Mining Minister.  He assured me that we’ll have a meeting with relevant agencies Tuesday 11/12/18
  • Petition due date is 19 December, 2018
  • The petition will be made online and we ask as many people as possible help us petition and socialize this matter.  Please help us fight for our rights.

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PNG resource extraction law at stake

“The truth is that our country is at a crisis point. If we do not correct some very serious faults and failures in how we approach the extraction of resources such as minerals, gas and oil we will not only continue to fail to deliver progress to our people, we will put the very survival of our country at peril.”

Editorial | The Sunday Bulletin | 2 December 2018

THIS week Papua New Guinea’s expanding resources industry will be showcased at a three-day PNG Mining and Petroleum Investment Conference.

Widely regarded as the nation’s premier international conference, will be held from 3 to 5 December 2018 at Sydney’s Hilton Hotel in Australia.

We understand that speakers will include the PNG Prime Minister, Peter O’Neill, along with a number of government ministers who will provide delegates with insights into the government’s policies in areas such as energy and environmental protection.

The PNG Chamber of Mines & Petroleum in its media release hinted that an important project that will be featured during the conference is the country’s upcoming Papua LNG project, of which a Memorandum of Understanding on this project was signed by the project’s joint venture partners Oil Search, Total and ExxonMobil and the PNG Government during the summit.

The Wafi-Golpu project, a 50-50 joint venture project owned by Australian-owned Newcrest Mining, and South African mining giant Harmony Gold which early works is expected to start in a few years will be a main draw-card for conference delegates.

While the current focus is showcasing our vast mining and petroleum potential to prospecting investors, there is a real need to correct PNG’s mining laws.

The review of mining legislation (The Mining Act 1992) is long overdue in Papua New Guinea. There have been some attempts made in recent times but nothing is forthcoming. How serious Government is about this review? It seems to have been carried out with very little urgency.

We have seen very little in the way of radical suggestions for changes in the way mining is done in Papua New Guinea.

For the truth is that our country is at a crisis point. If we do not correct some very serious faults and failures in how we approach the extraction of resources such as minerals, gas and oil we will not only continue to fail to deliver progress to our people, we will put the very survival of our country at peril.

We need a new vision for resource extraction. We need to make some hard decisions, not just make little changes around the edges. For example, we need to decide that the people own the resources. Not the government. Not outsiders. It’s the people. And we need to ensure that there is an equitable distribution of the benefits – not only to landowners, the affected areas, provinces and government, but to the entire nation. This is what our country cries for today, and this is what we must provide.

But to develop a strategy of sustainable prosperity, we must first understand the mistakes we have made in the past and continue to make. Someone must tell this story or we will never correct our mistakes.

The Mining Act 1992. That Act declares: ‘All minerals existing on, in or below the surface of any land in Papua New Guinea, including any minerals contained in any water lying on any land in Papua New Guinea, are the property of the State’.

The Oil and Gas Act 1998 makes a similar declaration in respect of oil and gas reserves throughout PNG.

The State has unilaterally wrested ownership of all wealth on or below the ground from the people who owned those resources for 40,000 years.

What we need now is for the government to change the much talked about Mining Act 1992 so that our resource owners get a fair share of the resource wealth that’s derived from their land.

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A high-profile deep-sea mining company is struggling

Nautilus has multiple problems, including the loss of an expensive ship

The Economist | December 5 2018

AFTER LISTING on the Toronto stock exchange in 2006 Nautilus Minerals became the public face of a daring new industry: deep-sea mining. It planned to pursue riches on the ocean floor, mining metals such as gold, zinc and copper, desired respectively for lustre, alloys and electronics. Robotic machines would cut, grind and gather volcanic rock at a site called Solwara 1, located 1,600 metres beneath the surface of the Bismarck Sea near Papua New Guinea (PNG). The resultant rocky slurry would be pumped up to a support vessel, then shipped to a site at which the metals could be extracted. Investors were convinced; Nautilus’s shares doubled from their initial price of C$2 ($1.80) in a few months.

Today a Nautilus share is worth just a few Canadian cents. Three problems have changed sentiment. First, the firm has had substantial contractual trouble with the government of PNG, in whose territorial waters Solwara sits. The two sides wrangled for years over payments that the government owed for its equity stake in the project. The government eventually stumped up, but the row slowed progress.

Second, the idea of using Nautilus’s vast machines to carve and crush underwater volcanoes does not sit well with environmental groups in PNG and around the world. That may have unnerved investors.

Third, uncertainty after the financial crisis of 2008-09 made it harder for Nautilus to fund its untested venture. That has left only two big shareholders: MB Holding, an Omani conglomerate, and Metalloinvest, a Russian steel and mining firm.

Timetables have slipped badly as a result. The firm states only that mining at Solwara 1 will now be delayed “past” the third quarter of 2019, with no start date offered. Meanwhile, the firm’s finances are making a descent. Some $350m is required to get mining going. Nautilus has drawn down half of a $34m credit line that MB Holding and Metalloinvest extended to it in January in exchange for the rights to purchase more shares (an arrangement which coincided with the departure of some senior managers and Nautilus’s chairperson). The company is due to start repaying these loans in January but, as of September 30th, only had $200,000 of cash.

To add to these problems, Nautilus appears to have lost the specialised support vessel that it had planned to use. It had chartered a new ship through MAC Goliath, an Emirati shipowner and operator. The vessel was nearing completion at the docks of Fujian Mawei Shipbuilding in Fuzhou in southern China in December 2017 when MAC Goliath defaulted on a payment. Nautilus was given the option to step in and make the missing payment, but was unable to do so. In July the Chinese shipyard found a new firm to take over the contract, MDL Energy, an Indian shipowner that is planning to engage in deep-sea mining explorations for India’s government. Kulpreet Sahni, MDL’s chief executive, confirms that his firm now owns the ship.

On December 2nd Nautilus stated that it was “in negotiations with various parties” about ownership of the vessel; its shares surged in response. But Mr Sahni says his firm terminated negotiations about Nautilus’s continued use of the ship months ago. On December 3rd Mr Sahni wrote to Nautilus’s boss, John McCoach, warning that the firm’s statement was detrimental to MDL Energy, and to Nautilus’s own minority investors, and that it might contact the Toronto Stock Exchange or take legal steps if the matter was not clarified. (In an emailed statement to The Economist, Mr McCoach declined to comment on the specifics of this story but said that some of it was “not accurate from our perspective”.)

If the vessel is gone, that would be a huge blow for Nautilus, for it had been custom-built for the firm’s particular mining methods. It will be near-impossible to replace, especially given Nautilus’s beleaguered finances.

But Nautilus’s travails have offered lessons to the rest of the deep-sea mining industry. Gerard Barron, Nautilus’s first financial backer (who sold out of the company years ago), has hired some of Nautilus’s ex-employees for DeepGreen, a new deep-sea mining venture which focuses on harvesting metallic nodules that are scattered across the sea floor in the deep ocean. These contain metals such as cobalt and nickel needed for the batteries and wind turbines that power the clean economy. Having watched Nautilus’s progress, he reckons that hoovering up nodules will be easier than grinding volcanic rock, and that their uses lend such activities a more environmentally friendly sheen. Other firms have made a similar bet.

Although the water in the Clarion-Clipperton Zone, a patch of Pacific sea floor in which such firms will operate, is some three times deeper than that at Solwara, the location is out on the high seas. That means it is subject to a clearer set of rules for mining and exploration which is overseen by the United Nations, thereby reducing the scope for wrangling with national governments. Nautilus holds a concession there, too. But if the firm does not secure a fresh infusion of cash, its machines may never venture further than a dock in PNG.

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Nautilus setting JV to secure support vessels for Solwara 1 project

Nautilus’ floating base.

UPDATE: 6 Dec. Nautilus Minerals is reported to have been referred to the Toronto stock exchange for misleading investors over the fate of its mining vessel which it is claimed has already been sold to a third party despite Nautilus claims below that it is preparing to buy the ship.

Cecilia Jamasmie | Mining.com | 5 December 2018

Shares in Canada’s Nautilus Minerals (TSX:NUS), one of the world’s first seafloor miners, climbed more than 10% on Monday as the company disclosed is negotiating the terms of an agreement with arm’s length third parties that would involve the creation of a joint venture company.

The purpose of the new firm, Nautilus said, would be to fund the acquisition of the Production Support Vessel (PSV) that Nautilus had previously arranged to be procured through shipbuilder MAC Goliath.

In July, the Vancouver-based company announced that MAC Goliath Pte’s had failed to pay part of a contract with the owner of the shipyard where the Nautilus’s support vessel were being made.

Nautilus, which is in the last stages of developing its Solwara 1 gold, copper and silver project, off the coast of Papua Guinea, said the support ship would be used at that venture.

The miner, which also is developing another underwater project, off the coast of Mexico, secured in May $34 million from lender Deep Sea Mining Finance, to finish Solwara 1, which is set to become the world’s first commercial deep-sea mine.

However, it lost support from Anglo American’s (LON:AAL), which decided to divest its 4%-stake in Nautilus.

Environmental groups have criticized the project, which will use three robotic machines weighing up to 310 tonnes to mine copper and gold from extinct hydrothermal vents on the ocean floor.

Nautilus plans to then mix the ore with seawater to create a slurry, which can be drawn to the surface, stored and then put on other ships for transport. The extracted seawater is then pumped back to the seabed.

Nautilus’ shares were trading up 10% in Toronto at 0.5 Canadian cents by 11:35 am Toronto time.

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Bougainville’s tinderbox threatens to reignite

Bougainville Revolutionary Army fighters look down on the Panguna mine in 1996

An independence referendum and unresolved issues over the rich Panguna copper mine threaten to tilt Papua New Guinea’s tumultuous autonomous island back to civil war

Alan Boyd | Asia Times | December 4, 2018

Foreign mining companies are jostling for exploration rights on the Papua New Guinea island of Bougainville ahead of a crucial independence vote next year that some fear could revive tensions that sparked a civil war that killed 20,000 in the 1980’s.

The island will need mining royalties to maintain a viable economy if the referendum backs independence, but unresolved issues over the Panguna copper mine are still a sensitive point with traditional landowners. Villagers shut the pit down in 1989, triggering the previous lethal conflict.

The referendum is the culmination of the Bougainville Peace Agreement, which formally ended the decade-long bloody civil war. It will take place as the US and Australia aim to work closely with Papua New Guinea to develop its Lombrum Naval Base to counterbalance China’s growing maritime influence in the region.

In January, the Autonomous Bougainville Government (ABG) said that an indefinite moratorium had been imposed on work at Panguna, which was the world’s biggest open-cut copper mine when it was being operated by Bougainville Copper Limited (BCL), a unit of Anglo-Australian mining giant Rio Tinto.

Rio exited in 2016, transferring its 53.8% shareholding to the ABG and the Papua New Guinea government, but there has been speculation the mine could reopen. Papua New Guinea’s government gave its shareholding to traditional landowners in the Panguna area.

“If we went ahead now, you could be causing a total explosion of the situation again,” ABG president John Momis said after the moratorium was declared.

“As far as the people are concerned and as the government, we cannot allow foreign companies to be causing division and using a very emotional situation [on] the ground to cause another war.”

In 1972, there were suggestions of colonialism and commercial exploitation over a decision to grant a mining license to Rio Tinto after minimal consultation with local villagers. Bougainville was then being ruled by Australia under a United Nations mandate that ended with Papua New Guinea’s achievement of independence in 1974.

The Panguna mine effectively underwrote that process: at one point copper from the mine was contributing 45% of Papua New Guinea’s annual export earnings and generating more than US$740 million from tax income and dividends.

But little of this money reached tribal groups; instead, they complained that trailings from the mine were killing their fish and poisoning farmland. In 1989, the Nasioi people broke into the site and shut the mine down.

Autonomous Bougainville Government President John Momis. Photo: Youtube

When Papua New Guinea sent riot police and troops to the island, villagers formed the Bougainville Revolutionary Army, a rag-tag separatist group that plunged the region into a decade-long civil war that left most of its infrastructure in ruins.

A fragile peace was achieved in the late 1990s under monitoring groups led by Australia and New Zealand, but the wounds remain raw. Several tribes maintain “no-go” areas to keep foreign firms out, and the remnants of the BRA, known as the Me’ekamui group, only disarmed this October.

Bougainville, which has closer ethnic links to the Solomon Islands than Papua New Guinea, was granted a limited form of autonomy under a formal 2001 peace treaty. The referendum, tentatively scheduled for June 15 next year, will decide whether the island should become completely independent.

However, it will not happen unless the ANG can find some way to bridge the gap between developers and traditional landowners who fear a repeat of the Panguna fallout.

Rio Tinto left behind an environmental mess of sludge and rusting equipment that some analysts estimate could cost US$1 billion to put right. The firm contends that it has already complied with regulatory requirements.

Momis knows that without mining, Bougainville will stay part of Papua New Guinea, as the island managed to cover only 14% of its total expenditure of US$50 million last year from domestic sources — mostly sales of farm products. It is expected to need a budget three times bigger if it votes for independence.

Resistance fighters from the Bougainville Revolutionary Army (BRA) in a file photo. Photo: AFP/Torsten Blackwood

Leaving the door ajar, Momis has said that the moratorium only covers mining at Panguna, which is inaccessible in any case because of a “no-go” order. A new mining law passed in 2014 clarified the regulatory situation and has attracted interest from firms in Australia, China, Canada and elsewhere.

But there is a catch: the law gave traditional landowners control over minerals on their land and the right to participate in any development decisions that might affect their interests. So the fate of Bougainville’s separatist movement now rests with those who started it in the 1980s.

Landowners that do deals with mining companies will have to face the wrath of neighboring tribes that could bear the consequences of mining. There are strong risks that tensions could boil over even before the referendum.

The wild card in this game of chance is Papua New Guinea, which is not obliged to allow Bougainville to break away even if there is a “yes” vote.

Indeed, it may prefer to keep a tight rein on its renegade region, especially if predictions of a vast untapped treasure of copper, gold and other minerals are realized.

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Kainantu profitable and will have long mine life, says K92 CEO

A core from Kainantu’s Kora deposit Source: K92 Mining

David James | Business Advantage | 4 December 2018 

Canadian miner K92 has found new ore and is ramping up its operations at its Kainantu mine in Papua New Guinea’s Eastern Highlands Province. In this exclusive interview, Chief Executive John Lewins tells Business Advantage PNG that the company is now profitable and has an anticipated mine life of over 15 years.

New ore discoveries are at the heart of Kainantu’s current health. When the mine was bought by K92 from Barrick Gold in 2015, John Lewins says the focus was initially on restarting mining operations on the Irumafimpa ore body.

The expectation in the previous owners’ original design was that this would yield about 20 grams of gold per tonne, but it was closer to 8.5 grams.

‘It was still pretty good but, when you are expecting 20, it is not so good,’ he tells Business Advantage PNG.

‘It was recognised that this ore body was also relatively difficult mining, in terms of narrow veins, clay and other technical issues.

‘It was therefore the intent of K92 to bring the previously unmined Kora ore body into production.’

Kora and Kora North

In mid-2017, K92 drilled the first diamond drill hole from underground, looking for an extension. Attention then turned to the Kora ore body, closer to the existing underground workings, which proved to be more prospective—and ultimately profitable.

Lewins says the initial discovery hole had yields of 11.7 grams of gold per tonne, 25 grams per tonne of silver and 1.2 per cent copper.

‘We developed out to this extension area, designated “Kora North” and mined a bulk sample which was treated through the existing process plant in October 2018, achieving recoveries of 92 per cent copper and gold from that sample.

‘So, we switched our mining to basically focus on Kora and in January of this year we were 100 per cent Kora.

‘At the end of January, we declared commercial production and made a profit. The first quarter for us was profitable, the second quarter was profitable, and the third quarter is not out yet but it is definitely positive cash flow.

‘So, for the year we will make money.’

Costs

Lewins says K92’s cash costs are ‘running at around’ US$560 an ounce (the current gold price is US$1213 an ounce).

‘All in sustaining costs, bearing in mind that we are developing a brand new mine effectively underground below US$800 an ounce.

‘We are giving (production) guidance this year of 42,000-46,000 oz. We will make that.‘

Lewins says the original Kora deposit contained an estimated resource of at least 1.65 million ounces of gold, and an additional Kora North is expected to be over one million ounces.

‘We are looking at a 15-to-20 year life for an expanded operation, treating 400,000 tonnes per annum and producing over 100,000 ounces per annum. And (production of) 400,000 ounces per annum, not the current 200,000 per annum.

‘We are planning an expansion that will cost about US$15 million to double throughput,’ says Lewins.

‘We are continuing to drill the Kora and Kora North deposits from underground, with a target of doubling the resource. All of this has been underground drilling.

‘We have a third rig coming in to extend the drilling.’

Lewins says the company will conduct a preliminary economic assessment by the third quarter of next year, and expects to have an estimated total resource of five million ounces (including Irumafimpa). K92 is also planning further exploration of the Kora ore body outside the existing mine lease.

Share price

Lewins says K92’s share price has doubled in the past year.

‘A company like ourselves, having five million ounces at relatively high grades at 12 grams per tonne—and in production in a market where quality assets are in short supply—is an attractive investment.

‘From a shareholder perspective that is positive. We have started delivering.’

K92’s share register is 45 per cent institutional investors and 40-45 per cent retail investors, mainly out of Canada.

Lewins acknowledges PNG is a challenging environment.

‘We are in a better position than most. We have got grid power, for instance.

‘We have got a sealed road, a highway which runs from the port of Lae to about 8 kilometres from the site.

‘We have a government airstrip right next to the road as well. We have good infrastructure.’

Up in smoke?

One challenge is entirely unforeseen, however.

‘Something that is totally out of left field is the legalisation of marijuana,’ says Lewins.

‘This has created a massive marijuana boom in Canada.

‘Hundreds of millions of dollars are going into investment in marijuana and that money is coming out of the mining sector.

‘If you look at the TSX and the ASX (Australian Securities Exchange) over the last 18 months; for the first time in living memory, the ASX has actually been outperforming the TSX in terms of the junior mining sector.’

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