Category Archives: Financial returns

Lihir to get Newcrest on target

An overall view of the Cadia mine in Orange, NSW.

Paul Garvey | The Australian | 25 July 2017

For much of its recent history, Newcrest Mining has been relying on its Cadia mine in NSW to make up for the problems at its Lihir mine in Papua New Guinea. Now, the roles are being reversed.

With Cadia out of action ­following an earthquake earlier this year, it was a record quarter from the oft-maligned Lihir that helped the Melbourne-based miner reach its annual production guidance.

Lihir produced 276,230 ounces of gold during the June quarter, up 20.3 per cent for the period in what was a record quarter for the operation.

The strong performance of Lihir — which had historically been the cause of several operational headaches during its early years under Newcrest ownership — helped make up for the sharp decrease in output at Cadia, which was hit by an earthquake in mid-April.

One of two panel caves at Cadia has since restarted production, with the outstanding panel scheduled to come back into operation during the ­September quarter.

The unexpected outage and the cost of remediation work at Cadia will likely weigh on Newcrest’s earnings when it posts it full-year result next month, with the costs associated with the ­incident likely to show up as an exceptional item in its accounts.

Newcrest managing director Sandeep Biswas said the record numbers out of Lihir reflected the “relentless drive for improvement” at the mine.

“Given the disruption to ­production at Cadia due to the seismic event, the overall ­performance this quarter was ­remarkable and demonstrates the resilience of Newcrest’s ­assets,” Mr Biswas said.

Newcrest’s total output for the quarter came in at 551,815 ounces of gold and 12,968 tonnes of ­copper, down from 598,602 ­ounces of gold and 22,074 tonnes of ­copper in the March quarter.

The outage at Cadia, which has historically been Newcrest’s highest-margin mine, meant the company’s all-in sustaining cost margin fell to $US360 an ounce during the June quarter, down from $US521 per ounce in the ­previous three months.

RBC Capital Markets analyst Paul Hissey said that while he ­expected the Cadia incident to affect Newcrest’s upcoming results, the company had been able to limit the damage with improved output from its other key mines.

“While events at Cadia appear largely beyond Newcrest’s control, this result shows that the company has been able to move other levers to broadly mitigate the impact,” he said.

Brokerage Goldman Sachs says the cost guidance in the full year results will be a key driver of sentiment towards Newcrest.

On the exploration front, Newcrest revealed it had applied for 40 exploration tenements in Ecuador, which is emerging as a new gold exploration hotspot. Newcrest has already entered Ecuador through its investment in SolGold, whose Cascabel copper-gold discovery is shaping up as particularly promising.

Newcrest spent another $US40 million on a further 4.5 per cent stake in SolGold during the quarter, taking its interest in the London and Canadian-listed group to 14.54 per cent.

Shares in Newcrest closed 18c, or 0.9 per cent, higher at $19.76.

Leave a comment

Filed under Financial returns, Papua New Guinea

Global mining major needed to re-open Bougainville’s Panguna copper mine?

 Kevin McQuillan | Business Advantage | 18 July 2017

Moves to re-open the Panguna copper mine on Bougainville are gathering momentum. Funding the re-opening is a key concern, however, says Bougainville President, John Momis. Could one of the global mining majors get involved?

Bougainville Copper Ltd (BCL) is currently advertising for a local Bougainville-based manager, and are looking at the payment of K14 million in rent and compensation that was owed to the 812 customary clan groups who own the blocks of land within the mining lease areas.

Autonomous Bougainville Government President John Momis tells Business Advantage PNG, that over the next year, he expects BCL to open an office and ‘start dealing with some of the legacy issues, demonstrating BCL’s commitment, in a just and fair way, to some of the real issues that have been bothering the land owners.’

That includes, he says, the ecological, environmental, and health damage issues caused by former owner, Rio Tinto.

‘They have walked away, so now BCL has to address that.’

Momis says the Joint Steering Committee preparing for the mine’s re-opening consists of representatives from the nine official landowner groups, BCL, the national government, and the ABG, and is to be chaired by an independent chairman.

Funding

A key challenge is the cost of reopening the mine; back in 2012, BCL estimated it would be US$5 billion.

‘BCL has to demonstrate to us they have ability to solicit funds and attract a developer and I’m sure they are thinking about this,’ says Momis, pointing out that under Bougainville’s 2014 Mining Act, BCL has first right of refusal about re-opening the mine.

‘The Panguna mine is a “high-risk, high-return” investment.’

‘We are giving BCL the opportunity to get funds and to meet the conditions as per the mining law. If they fail, then other companies will have to apply and be put through this process.’

High-risk, high-return

Mining industry analysts describe the Panguna mine as a ‘high-risk, high-return’ investment, which only global miners would be interested in.

Greg Evans, KPMG’s Perth-based Global Leader, Mining Mergers and Acquisitions, believes there will be considerable interest.

‘If you look at what the resource is, and what it can deliver to both an owner and investor—and, probably more importantly, the local economy—it would have to be a definitive “yes”.

‘The copper price is heading in the right direction, the supply metrics are working in the favour of copper broadly and I would expect that BCL are being approached reasonably regularly by a number of metals traders.’

Evans points to growing demand for copper, noting that batteries in electric vehicles are likely to use 927,000 tonnes of copper a year by 2030, according to forecasts by Bloomberg New Energy Finance. That alone equates with 5 per cent of current production.

Global

Evans believes a global miner, ‘like Glencore or similar’, is likely to become involved.

‘KPMG just completed a survey around transaction activity across a bunch of sectors. In the mining sector, the preference of the majors was particularly for joint ventures at the asset level.

‘Batteries in electric vehicles are likely to use 927,000 tonnes of copper a year by 2030.’

‘To me, that would be the form that a transaction would likely take. BCL would ensure the social licence to operate, and look after stakeholder management, political and administrative management on the ground, with perhaps a partner coming in providing financial and operational support.

‘So, it is likely to be a large industry player used to dealing in remote locations, eliciting strong local community engagement, and creating local employment as an obligation and priority. All those things are going to be required.’

Risks

Satish Chand, Professor of Finance at the University of New South Wales and based at the Australian Defence Force Academy in Canberra, says risk assessment will be crucial.

‘There has been a history of conflict where a very small number within the population has the ability to stop a very large mine. That risk remains.

‘There is a contest over the distribution of proceeds and that has not yet been settled to my understanding. There is little that is known about the magnitude of the cost involved in the clean up.’

Chand notes that the Bougainville Mining Act says 51 per cent of the mine must be locally-owned. The non-binding referendum on Bougainville’s independence from PNG scheduled for 2019 must also be considered a ‘risk’.

Greg Evans agrees the local shareholding requirement makes the financing prospect ‘more challenging’.

‘The biggest successes that the majors have had in countries such as Africa and South America, have been where they’ve engaged local communities, shared the profits, and shared the benefits. The control over how those profits flow and are allocated is equally the challenge—as it is the solution.

‘You’ve always got to come back to the quality of the resource; which will always make it attractive.’

1 Comment

Filed under Financial returns, Mine construction, Papua New Guinea

De Beers Hoovers Up Its Best Diamonds From the African Seabed

Photographs by Simon Dawson/Bloomberg

Kevin Crowley and Julius Domoney | Bloomberg | July 11, 2017

For years oil was the big commodity found offshore. These days diamond giant De Beers finds some of its most valuable gems on the Atlantic Ocean seabed off the coast of Namibia.

They are literally vacuuming them off the ocean floor.

The world’s biggest diamond producer has spent $157 million on a state-of-the-art exploration vessel that will scour 6,000 square kilometers (2,300 square miles) of ocean floor for gems, an area about 65 percent bigger than Long Island. The Anglo American Plc unit mines in the area in a 50-50 joint venture with the Namibian government.

The vessel will scan and sample the seabed to identify the most profitable areas for the ships, which suck up diamonds before they’re flown by helicopter to shore. The investment will help the company maintain annual production of at least 1.2 million carats for the next 20 years, Chief Executive Officer Bruce Cleaver said in an interview. Those stones are “very important to our global mix and to our customers who are looking for higher-value diamonds,” Cleaver said.

Namibia’s diamonds, which have been washed down the Orange River from South Africa over millions of years and deposited in the ocean, are key to De Beers because of their high quality. While not the biggest, the gems have few flaws after being broken from larger stones on their way to the sea bed. Only the strong and good quality ones survive, Cleaver said.

De Beers’s Namibian unit sold its diamonds for $528 a carat last year, much higher than the $187 average for the whole company’s stones and accounting for about 13 percent of total earnings.

The giant subsea “crawler” tractor is lowered into the ocean from the deck of the Mafuta.

De Beers finds some of its most valuable diamonds on the Atlantic Ocean seabed.

The Mafuta exploration vessel dredges the seabed at depths of around 150 meters off the Namibian coast.

Leave a comment

Filed under Financial returns

Downturn in exploration affects jobs [oh, and our profits too!]

Nice bit of spin from the mining industry – all they care about is their own PROFITS not jobs for local people!

The great news is the people in the picture still have jobs living on and farming their own land. What the foreign mining execs are really worried about is losing their own jobs!

The truth is the foreign mining companies depend on PNG, but PNG does NOT need to depend on them. Sustainable development in PNG should be about agriculture, tourism and small manufacturing NOT big destructive mines!

Loop PNG | 11 July, 2017

A significant downturn in mineral exploration has resulted in loss of jobs and business opportunities in the country.

In its bi-monthly issue, the PNG Chamber of Mining and Petroleum highlighted the drop in exploration investment, which has the potential to severely impact the country’s mining sector.

In a survey conducted by the Chamber, covering the period between 2012 and 2015, mineral exploration expenditure dropped from a peak of K944.3 million in 2011 to K325.5 million in 2015.

This followed a near decade of high activity from 2003 to 2011.

The Chamber adds despite feasibility studies for the Frieda River and increased exploration expenditure in 2015 for the Wafi-Golpu Project, the overall expenditure was still well below 2013 levels.

The downturn has already affected many rural Papua New Guineans through the loss of direct employment and potential new business opportunities, while businesses and suppliers have also lost much-needed income as a result of many junior exploration companies ceasing their operations.

During the Chamber’s annual general meeting, president Gerea Aopi said this concern is exacerbated by the proposed changes to the mining act.

“We have to make every endeavour to ensure that this downward trend does not continue, although we have little or no control over the global commodity price market,” Aopi said.

“What PNG can control is the fiscal and legal frameworks that directly impact this sector. Our aim must be to ensure PNG can continue to grow existing projects and also foster an environment conducive to attract new investments.”

Aopi further added that the lodgment of Special Mining Lease applications for Frieda River and Wafi Golpu projects last year is an indication of why PNG must maintain its investment attractiveness.

“These projects are very important to the PNG economy as existing mines like Ok Tedi, Porgera and Lihir are in mature stages.

“Both projects, when developed, will have positive economic impact for PNG and together with the operating mines, could place PNG as one of the top copper and gold producers in the world,” he said.

Leave a comment

Filed under Environmental impact, Exploration, Financial returns, Human rights, Papua New Guinea

Experimental Seabed Mining and the Controversial Solwara 1 Project in Papua New Guinea

The Deep Sea Mining Campaign is a collaboration of organizations and citizens from Papua New Guinea, Australia and Canada concerned with the likely impacts of deep sea mining on marine and coastal ecosystems and communities.

Peter Neill – Director, World Ocean Observatory | Huffington Post | July 11, 2017

It has been some time since we’ve reflected on the issue of deep sea mining — the search for minerals of all types on the ocean floor. We have seen already how marine resources are being over-exploited — over-fishing by international fisheries being the most egregious example, mining for sand for construction projects and the creation of artificial islands, the exploitation of coral reefs and certain marine species for medical innovations and the next cure for human diseases based on understanding and synthesis of how such organisms function.

The Deep Sea Mining Campaign, an organization based in Australia and Canada, has been following the saga of Solwara 1, proposed by Nautilus Inc. for offshore Papua New Guinea that continues to seek financing year after year since 2011. The project is basically a kind of corporate speculation premised on the lucrative idea of the availability of such minerals conceptually in the region — indeed the company has declined to conduct a preliminary economic study or environmental risk assessment, the shareholders essentially engaged in a long odds probability wager comparable to those who invested in marine salvagers attempts to find and excavate “pay-ships” lost at sea with purported vast cargos of silver and gold. The idea that they should be required to justify their endeavors to governments, third-world or otherwise, or to coastwise populations whose livelihood and lives depend on a healthy ocean from which they have harvested for centuries, is anathema.

Deep Sea Mining recently reported on the recent Nautilus Annual General Meeting where CEO Michael Johnston was asked:

· Is it true that without the normal economic and feasibility studies, the economic viability of Solwara 1 is unknown?

· Is it true that the risk to shareholders of losing their entire investment in Nautilus is high and the potential returns promoted by Nautilus are entirely speculative?

· Is this why Nautilus is struggling to obtain the investment to complete the construction of its vessel and equipment?

According to the release, Johnston declined to have his responses recorded and evaded providing clear answers. He did, however, affirm the description accuracy of the Solwara 1 project in the Annual Information Forms as a ‘high’ and ‘significant’ risk.

Local communities are also not interested in the Nautilus experiment. In recent weeks, two large forums against the Solwara 1 deep sea mining project in the Bismarck Sea have been held in New Ireland and East New Britain provinces of Papua New Guinea. Supported by the Catholic Bishops and Caritas Papua New Guinea , both forums called for the halt of the Solwara 1 project and a complete ban on seabed mining in Papua New Guinea and the Pacific. Here are some comments from those meetings:

Patrick Kitaun, Caritas PNG Coordinator:

“The Bismarck Sea is not a Laboratory for the world to experiment with seabed mining. Our ocean is our life! We get all our basics from the ocean so we need to protect it. We will not allow experimental seabed mining in Papua New Guinea. It must be stopped and banned for good.”

Jonathan Mesulam of the Alliance of Solwara Warriors:

“Nautilus, we are not guinea pigs for your mining experiment! We in the Pacific are custodians of the world’s largest ocean. These oceans are important to us as sources of food and livelihoods. They are vital for our culture and our very identity. In New Ireland Province, we are only 25 km away from the Solwara 1 site. It is right in the middle of our traditional fishing grounds. We will stand up for our rights!”

Vicar General, Father Vincent Takin of the Diocese of Kavieng:

“In order, for any development to take place, the people must be the object of development and not subject to it. The people have not been fully informed about the impacts of Solwara 1 on the social, cultural, physical and spiritual aspects of their lives. Therefore they cannot give their consent.”

Nautilus Inc. does not appear to be major international energy company with the assets available to force this project forward as others might. The opposition is well organized and vocal with arguments and expectations that the company cannot overcome. We hope. As with offshore oil exploration alongshore and it the deep ocean, this project is isolated in an opposing political context and shifting market. It is not for this time, for these people in these places, who have no concern for the loss of the `stranded assets of invisible gamblers in the face of the gain of conserving and sustaining their ocean resources for local benefit and the future.

Leave a comment

Filed under Corruption, Environmental impact, Financial returns, Human rights, Papua New Guinea

Bougainville SML proposes mediated talks on Panguna

Radio New Zealand | 5 July 2017

A Bougainville landowner group wants to reach a compromise with the autonomous government over re-opening the Panguna mine.

The government in the Papua New Guinea region wants to bring back Bougainville Copper Ltd to run the mine, but the Special Mining Lease Osikaiyang Landowners Association, which owns the site, has teamed up with another miner, RTG.

SEE ALSO: Renzie Duncan and Philip Miriori team up in another illegal Bougainville venture

The mine re-opening is viewed as critical to Bougainville achieving some fiscal self reliance ahead of a vote on independence in June 2019 [COMMENT : this is nonsense – it would be at least a decade before any money would flow to the government, even if the billions needed could be found to rebuild the mine]

An abandoned building at Panguna mine site in Bougainville Photo: supplied

The chair of the SMLOLA, Philip Miriori, said they were proposing talks with the ABG to sort the matter out.

He said they would like to bring in a mediator.

“We have this timeframe, a very important timeframe for a referendum, 2019 – we need mediation because he will make sure we find a fair solution for SML [Special Mining Lease Osikaiyang Landowners Association], for ABG and for the rest of Bougainville. So you know there will be a win – win situation,” said Phillip Miriori.

1 Comment

Filed under Financial returns, Human rights, Papua New Guinea

Weak capacity and lack of accountability leaves mining sector ‘open for corruption’

Policy implementation in sector a challenge: Report

Loop PNG | 4 July, 2017

Implementing legislations and policies in the mining and petroleum sector is a challenge due to weak capacity and lack of accountability, points out a report.

The PNG Extractive Industries Transparency Initiative Report 2014 says:

“While the Government sets strong policy and has a relatively robust legislative regime and fiscal control, implementation is challenging due to weak capacity and a lack of accountability, particularly at local levels. The associated lack of transparency also leaves the way open for corruption.

“The principal laws that regulate mining activities in PNG are the Mining Act 1992 (MA), which sets out how mining projects should be administered and regulated, and the Mining (Safety) Act 1977, which stipulates safety requirements on mine sites, provides for investigations and inquiries into mine accidents and establishes a regime for certification of prescribed mining roles” the report said.  

The report noted that a revised MA will be presented to Parliament after 2017 election.

“It is anticipated this will include regulations for offshore mining, mine closure and rehabilitation, resettlement and geothermal resources and standards for employing mine workers. The Mining (Safety) Act is also under review,” it said.  

Matters relating to the environment within mining and exploration tenements is governed by the Environment Act 2000. The operation and development of mineral deposits in relation to the Ok Tedi mine is governed by the Mining (Ok Tedi Agreement) Act 1976 and the fourteen supplemental agreement Acts.

The Panguna mine on Bougainville is governed by the Mining (Bougainville Copper Agreement) Act 1967, although mining legislation for the Autonomous Region of Bougainville has now been passed.

“The relationship between those respective pieces of legislation is unclear as the former has not been repealed, nor have the references to it in the MA been amended,” it said.

The reports stated, the petroleum industry is governed by the Oil and Gas Act 1998 (OGA) and the Oil and Gas Regulation 2002 under the administration and management of the Department of Petroleum and Energy (DPE), headed by the Minister for Petroleum and Energy.

“The OGA specifies regulatory instruments for oil and gas development activities such as: Licensing, exploration, development, processing, storage, transportation, and sale of products.”

PNG EITI Head of National Secretariat, Lucas Alkan, said: “It is only fitting to have such a robust legislative and policy framework for a resource rich country like ours.

“The PNGEITI has already capitalised on such fiscal and legislative setting, in advancing transparency and accountability in the sector, through its annual reports and we hope to build on that progress.

“We are also of the view that there are upcoming legislations and policies to keep Papua New Guinea in par with world best mining and petroleum practices,” Alkan added.

Leave a comment

Filed under Corruption, Financial returns, Papua New Guinea