Category Archives: Financial returns

Wafi-Golpu Negotiations Have Not Recommenced – Newcrest

Matthew Vari| Post Courier | March 16, 2020

NEGOTIATIONS into Morobe’s Wafi-Golpu project is still pending according to project joint venture partner Newcrest Mining Limited.

Newcrest Mining PNG country manager Mr Stanley Komunt said this in response this paper queries in relation to comments made by Mining Minister Johnson Tuke last month on government’s intention to resumes negotiation following the dismissal of the memorandum of understanding in court case relating to the project.

Mr Komunt said the main reason for uncertainty was the relays [sic] in the proposed revised mining act, which is still yet to be passed by government and  how concerns raised may be factored into the amended act.

“We from the JV’s point of view have not made a commitment as yet to progress any discussions.

“There is a couple of reasons why and number one is more to do with the current discussions on the revised mining bill.

“We really don’t know where that is going to end. Whilst the Prime Minister has given us, the industry and SNT (State Negotiating Team) team to go and back and since our meeting in January 17 in Brisbane.

“He has given us two months and we have been meeting last month now and we are slowly getting there but there is still some major, not so much disagreement, but misalignment I would say,” Mr Komunt pointed out.

Komunt pointed out other particulars also in the air such as benefit sharing, royalty and contracts have all been relayed to the minister responsible for mining.

“Whilst we appreciate, the company, not only us but the industry appreciates that country needs to get a better share and we want to make sure that is realized through the negotiations that we will have.

“We are not quite there yet to start the negotiations for Wafi. We have relayed that to the minister.

“Because if the revised mining act changes it will have an impact on the project economics and how we have done our planning and that is a major concern and we can’t do anything.

Prime Minister Marape has indicated his government is set on delivering the project, a point Komunt added the PM is well aware and supportive of an understanding going forward.

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PNG production issues plague Newcrest

The Lihir gold mine in Papua New Guinea

Derek Rose | Australian Associated Press | March 11, 2020

Australia’s largest listed goldminer says it expects to produce around 10 per cent less gold than previously forecast due to underperformance of its mines in Papua New Guinea and Western Australia.

Newcrest Mining now only expects to produce 2.1 to 2.2 billion ounces of gold this financial year, down from a forecast of 2.38 to 2.54 billion ounces it made on January 30.

The goldminer said increased production at its Cadia mine in central-west NSW and Red Chris mine in British Columbia, Canada won’t be enough to outweigh shortfalls from its Telfer mine in WA and Lihir mine in PNG.

Lihir, located on an extinct but geothermically active volcanic crater on Aniolam Island 900km northeast from Port Moresby, is proving to be particularly difficult, Newcrest said.

“Lihir has been challenged by difficult mining and geothermal conditions, leading to a sub-optimal blend of ore feed to the plant,” Newcrest managing director and chief executive Sandeep Biswas said.

That lower grade material ore proved problematic to the mine’s material handling systems and flotation recovery, Newcrest said.

“Operating improvements planned at Lihir for the remainder of FY20 will be insufficient to address its shortfall in production.”

Newcrest also announced it had found a “pod” of high-grade mineralisation at its Havieron Project, 45km from its Telfer mine in WA.

Mr Biswas called the mineralisation “amongst the most impressive seen in recent memory” and said Newcrest was excited about mining it.

Newcrest said it would study the potential of Havieron into commercial production in about three or four years.

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Alluvial Sector Revenue at K550m in 2019

Patrick Tom | Post Courier |  March 9, 2020

The country’s alluvial sector production and revenue has climbed to K550 million in 2019, an increase of K140 million from what it earned in 2018.

Mineral Resource Authority regulatory operations manager Roger Gunson revealed during the launching of the Reducing Mercury in PNG ASGM sector last Friday that last year the country’s alluvial sector generates revenue of K550 million, and produced 120,000 OZ (ounces) of gold.

When put that in perspective that’s similar to a medium size mine like Simbari mine in New Ireland.

Mr Gunson said gold represents 70 per cent of mineral revenue, adding that current the gold price as of last Friday was at almost US$1670 an ounce filtering with historic highs.

“The high gold price is beneficial for PNG and the alluvial sector,” he said.

“For every US$100 increase in the gold price, our mineral revenue increases by over K650 million,” said Mr Gunson.

He said that provides some perspective on the significance of gold to our economy.

“From the grassroots miners working the rivers and streams boost their rural household income, through to the national government collecting taxes.”

“The sector is one of the largest small and medium enterprise directly benefits those communities that involve in alluvial gold mining,” said Mr Gunson.

He also pointed out that PNG alluvial sector has a significant component of the overall mining industry of Papua New Guinea.

It has been operating since 1881.

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Mining in Ok Tedi will end around 2027: Exec

Peter Esila | The National aka The Loggers Times | March 2, 2020

OK Tedi Mining Ltd in Western invests about US$20 million (K66.46 million) annually in drilling for reserves, chief executive and managing director Peter Graham says.

Graham said current exploration was focused near the Mt Fubilan mine and within existing special mining lease (SML).

“The most prospective targets indicate underground rather than open pit mining,” he said.

Graham said the life of the mine, based on current reserves and mining rate, would end around 2027.

“The mine is limited by an agreement with communities on the amount of waste material mined and placed in waste dumps,” he said.

“Without this limitation, mine life would be longer.

“Efforts are therefore being focused on potential stable waste dumps, in-pit waste disposal and a potential tailings storage facility.”

Meanwhile, OTML is a major producer of copper concentrate for the world smelting and refinery market in Germany, India, Japan, South Korea and the Philippines.

The mine exports copper as a concentrate which contains gold and silver.

From start of operations in 1984 to end of 2018, Ok Tedi has produced 4.83 million metric tonnes of copper, 14.8 million ounces of gold and 32.7 million ounces of silver.

In addition to the SML, OTML holds a portfolio of several exploration leases (ELs), other leases for mining purposes (LMPs) under the PNG Land Act.

Apart from its direct monetary contribution, OTML is also involved in Western’s development through tax credit scheme and other infrastructure projects such as health centres, school classrooms, houses, roads, airstrips, jetties, water supply and communication systems for the villages.

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Booting Exxon gives Marape a boost – for now

Western Highlands province in Papua New Guinea, the region of the proposed P’nyang LNG development (ADB/Flickr)

The rejection of the P’nyang LNG deal signals a new way of doing business, and a shifting landscape for US concerns.

Bal Kama | The Interpreter | 19 February 2020

The recent announcement of the Papua New Guinea (PNG) Government to cease all negotiations with one of the United States’ largest oil and gas companies, Exxon Mobil, over the P’nyang LNG project, a new gas field in PNG, has broader implications for the US and Papua New Guinea.

At first glance, the decision against Exxon for allegedly acting in bad faith is part of a wider crackdown by the government of Prime Minister James Marape to ensure greater fairness in the resource sector. Since ousting then–Prime Minister Peter O’Neill in a vote of no-confidence in 2019, Marape has charted a different approach from that of his predecessor, under the banner of “Take Back PNG” – a larger policy objective to reassess PNG’s developmental direction and regain lost opportunities. Marape laid out his vision in his inaugural visit to Australia in 2019 and is gradually applying it in many sectors.

The decision illustrates the growing frustrations of dealing with investors in resource-rich PNG, and it further demonstrates an emerging crop of PNG leaders confident in reassessing the status quo. For the US, Exxon’s alleged conduct, criticised by the PNG government as being “exploitative”, undermines US efforts in the Pacific region as a force for good.

Exxon Mobil has a US$19 billion liquefied natural gas project in PNG (PNG LNG), which made its first shipment in 2014. The PNG LNG project, which remains the largest economic investment by the US in the Pacific, coincided with former US President Barack Obama’s announcement in 2012 of a “pivot to the Pacific” policy. The geopolitical scenario of the day, the excitement of having the US interested in PNG, and the high expectations surrounding a global and reputable company, among other factors, influenced the PNG government’s initial agreement for Exxon to operate the PNG LNG project. It was thought the deal would have a transformational impact on PNG’s economy – an assurance that continues to be projected by some quarters.

However, the overall economy of PNG did not experience the projected windfall. Instead, there were a series of negative outcomes over the years at both a national and a local level – national debts grew, and unfavourable benefit-sharing arrangements and royalties led to conflict among traditional resource landowners. Many have questioned whether the resource boom marked by the PNG LNG project was in fact a “resource curse”.

“Absolute bad faith”

The ousting of Prime Minister Peter O’Neill in 2019 was partly a result of growing grievances over the failure to deliver on the promises of the Exxon-led project and other resource deals. An important issue was the high level of concessions made in those deals. Historically, PNG governments, desperate to become investor-friendly, have made hasty concessions that often disadvantaged the country from having a fair share of the revenue from the development of their resources.

In a 2016 report, the International Monetary Fund (IMF) observed that “the tax arrangements for PNG’s mining and petroleum sectors are very generous compared to other resource-rich countries and do not reflect the maturity of the PNG resource sector”. The World Bank, in a 2017 report, also found particularly for the Exxon-led LNG project that Exxon Mobil and its PNG LNG partners created “a complex web of exemptions and allowances that effectively mean that little revenue is received by government and landowners”.

The PNG government must share some burden of fault for creating this scenario – including, for instance, the failures by previous PNG governments to negotiate a favourable outcome for the country, the misuse of funds by political leaders, a politicised bureaucracy unable to carry out their due diligence, and judicial interventions that at times hinder payments to disgruntled landowners.

This does not, however, excuse Exxon and its partners from the grave unfairness suggested in these reports. This, together with his experience as a minister in previous governments, underpinned Marape’s firm stance on taking a different approach in the current deal on the P’nyang LNG project. In his appeal for Exxon Mobil to act fairly, Marape noted that “the initial terms [in the PNG LNG project] provided by PNG were so generous” and that new “reasonable terms” should be considered for the P’nyang project.

Papua New Guinea’s Prime Minister James Marape (C) at Parliament House in Canberra, during a six-day visit to Australia in July 2019 (Mick Tsikas/AFP via Getty Images)

The terms proposed by the PNG government are not publicly available, but they appear to include giving no fiscal concessions in P’nyang, treating it as separate project from the current LNG projects and increasing domestic market obligations, local content participation, and landowner’s royalties from the current rate of two percent. The Prime Minister described Exxon’s refusal to accept the terms as a move to “extract even more profit for themselves”, while Kerenga Kua, the Minister for Petroleum and Energy denounced Exxon as acting in “absolute bad faith” and coming into PNG “with a determination to exploit our vulnerabilities, exploit us for our weak economic position and take advantage of us”.

A principled populist

The firm position taken by the Marape government is historic – no previous government has ever taken such an approach. PNG has had resource deals in the past that have resulted unfavourably for the country, but past governments have been shown to align more closely with investors than with their citizens.

The leaders and the people of PNG appear to be supportive of Marape’s approach. Further, the government is considering amending and tightening the legislative framework to ensure an equitable resource sector.

Marape is unlikely to concede to Exxon Mobil, as he insists: “You win for your shareholders, and I win for my people”. James Donald, a Member of Parliament representing the area where P’nyang LNG site is located, cautioned Exxon against crossing “a line between commercial parity and commercial greed”. Other MPs representing the resource areas have also demonstrated support for Marape’s stance against Exxon.

The PNG government is likely to reconsider its current position if Exxon responds positively to its terms. Unless that happens, however, there appears to be a general distrust for Exxon among the people of PNG – a situation far from the hope Exxon represented when it first entered the country. The distrust for Exxon has broader implications when one considers Exxon not only represents US economic prestige in the Pacific, but a society whose business ideals are expected to reflect the democratic values of fairness and just outcomes. The longer this tussle between Exxon and the PNG Government continues, the greater the distrust is likely to be, not only for Exxon, but for what it represents – the United States – in the Pacific.

As the vote of no-confidence scheme against a sitting government in PNG resumes later this year, those affected by Marape’s firm policies may hope for a change in government. In the fluid political landscape of PNG, a populist and comparatively principled Marape faces a challenge beyond just his immediate political rivals, and inside company boardrooms. However, if anything, his approach to governance so far has been reassuring for the people of Papua New Guinea.

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Rural alluvial miners to be empowered

Loop PNG | February 11, 2020

Morobe Governor Ginson Saonu has reaffirmed the Morobe Provincial Government’s position to empower all rural alluvial miners of Wau-Bulolo.

This was highlighted following a discussion with four tenement holders of Wau, Bulolo and Watut River in Bulolo District.

Governor Saonu said MPG has now engaged the services of Albatross Integrated Limited, who have extensive years of working with alluvial miners and other mining projects of New Ireland Province.

The company will be the coordinating body to ensure the alluvial miners are empowered.

“These are new interventions undertaken by MPG and to drive the agenda of mining in Morobe,” Governor Saonu stated.

“I have appointed a Tutumang committee chairman for mining who will work closely with the alluvial miners, landowners, miners associations and cooperative societies from here and onwards to ensure they are fully taken care of in their activities. All reports will then be presented back to PEC on the progress of the alluvial miners.

“I understand that over the many years, the landowners and historical miners of small scale mining in Wau- Bulolo have been deprived of the full benefits of their gold, and so it is time for MPG to intervene to assist them to reach maximum benefits of alluvial gold.”

Governor Saonu said plans are in place to ensure all alluvial gold collected by the landowners and tenement holders are made into gold bars to ensure financial security in the long run.

“The Regulatory Operations Division (ROD) of the Mineral Resources Authority and Albatross Integrated Limited will work now more closely with the landowners and tenement holders to ensure the all are fully taken care of in their alluvial mining activity.

“The aim of empowering the alluvial miners is part of the Economic Policy of Triple 1, where people of Morobe are empowered at which activity they are engaged in to be financially sound,” Governor Saonu explained.

He further emphasised that financial literacy training will be conducted for all Wau-Bulolo alluvial miners as well to ensure they are financially capable.

“The alluvial mining sector will be another economic opportunity for Morobe and a revenue generating activity for Morobe as well.”

Matthew Dalga, the MRA Development Engineer at the Small Scale Mining Branch representing ROD and MRA, said alluvial mining has huge potential and it can bring positive benefits if well-coordinated and supported.

“The MRA will support wherever possible in terms of compliance and ensure the regulatory process is followed so that the initiative taken progresses to a positive direction,” he stated.

Albatross Integrated Limited Principal Bridget Laimo said all good governance and transparency mechanisms will be in place to ensure all alluvial tenement holders and people are given maximum benefit for their efforts.

“Albatross working will be a family orientated partnership with the alluvial miners from onwards,” she stated.

“The levies retained from the alluvial gold sold will go back to your communities to help build roads, schools and all other necessary development infrastructure.”

Albatross Integrated Limited for six years have been working with landowners at New Ireland Province, and also up at Hides and Porgera and will now do the same for Morobe.

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PNG PM urges multi-nationals to allow gas project to proceed

Papua New Guinea’s prime minister James Marape. Photo: PNG PM Media Unit

Radio New Zealand | 8 February 2020

Papua New Guinea’s prime minister has urged two energy companies not to hold a major LNG gas project in his country to ransom.

James Marape’s appeal to ExxonMobil and Oil Search follows the failure of negotiations with the former over the fledgling $US13 billion P’nyang gas project

Oil Search said PNG was demanding terms of Exxon that meant the project developers would not gain a sufficient return on their investment.

But Mr Marape accused Exxon of a “lack of interest” to meet PNG halfway by offering concessions for a better state take from the deal.

The failure of the negotiations has raised doubt over the future of the separate Papua LNG gas project signed with French major Total.

Mr Marape said he called upon the two multi-nationals, as beneficiaries of concessions previous governments have given, to work with Total to deliver Papua LNG.

However, he appeared to leave the door open for an agreement with Exxon over the P’nyang gas project proceeding.

He said in the interests of fairness, a Ministerial Gas Committee would request both the state negotiating team and ExxonMobil to present their positions for the State – through a committee of leaders – to decide what is the best outcome for PNG.

The prime minister said he had indicated on all levels of discussions that fundamental policy principles that influenced his government’s mindset would not change.

“These include no fiscal concessions in P’nyang, treating P’nyang as separate from both PNG and Papua LNG projects, increase in Domestic Market Obligations and local content participation,” he said.

“These will be fundamental in progressing P’nyang.

“In the meantime, I call upon ExxonMobil and Oil Search not to hold the Total project in Gulf to ransom.

“If you model the project to be uneconomical, then don’t push it: let’s leave the gas in my land and you develop Papua plus further work in PNG LNG.

“After SNT and ExxonMobil present to the MGC, Cabinet will decide on P’nyang.”

Mr Marape said his government would shift focus to Wafi-Golpu and Porgera mines, and other resource sectors so life in PNG was not only dependent on P’nyang and other LNG gas projects.

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