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Papua New Guinea’s Frieda River project still faces obstacles, says Managing Director Fred Hess

Image: PanAust’s Fred Hess. Source: Business Advantage International

PanAust’s Fred Hess. Source: Business Advantage International

EMTV News | 29 December 2016

PanAust [owned by the Chinese company, Guandong Rising Assets Management] is keen to start development of the Frieda River copper-gold project, Managing Director Fred Hess told the Papua New Guinea Mining and Petroleum Investment Conference in Sydney last week. But he warned there are many obstacles to overcome before a final decision to go ahead with the mine.

Hess said the nature of the resource at Frieda River in West Sepik Province is well understood, noting that the project ‘has been known about’ for almost 50 years.

‘We are now in the phase where we are waiting for permit approval to take place,’ he told the conference.

‘Realistically, with the elections due next year, and with the size and complexity of the project, we are expecting that may take a while to get through to completion.

‘Once that process is finished, we then sit down and look at what the environment is like for making an investment decision and essentially there are a number of conditions that will have to be met in order for us to proceed to that investment decision.’

‘The embankment will take up about 40 per cent of the total capital cost of the project.’

Environmental issues

Hess described the project as a substantial open cut mining operation dominated by a very large storage facility.

‘That facility is designed to take the tailings from the processing plant and the waste from the mine and all of that sits behind a very large embankment,’ he said.

Hess said the embankment will take up about 40 per cent of the total capital cost of the project.

‘It doesn’t produce any copper but it is a necessary requirement in order to produce copper,’ he told delegates.

‘It is distinctive in the sense that PNG has traditionally taken cheaper forms of tailings and waste disposal routes.

‘But, because of the issues that we have with Frieda River being upstream from the Sepik River, this is the solution we have come up with which we think addresses all the environmental issues that are so important to a project like this succeeding.

Hydro power

‘The other special part of this project is that, because of the size of the embankment, because of the size of the catchment it sits in and the amount of water that falls as rain and gets collected in the catchment, and because of the height of the embankment, the opportunity to produce hydro-electric power also presents itself.

‘There are no free lunches. We must be mindful of the risks of developing large scale projects.’

‘That makes it a unique storage facility in our assessment in being able to store not only tailings, mining waste and water but it can generate a return in terms of hydro electricity.’

World scale deposit

Hess said the project is of national significance, describing it as a ‘world scale deposit’ that is in the top 10 undeveloped copper deposits in the world. He said it will create many jobs for locals, but he warned that there are challenges.

‘There are no free lunches. We must be mindful of the risks of developing large scale projects. Frieda River has substantial logistical challenges. It is inland; there are no roads.

‘It is ‘crucial not to jeopardise the livelihoods and environment for all those people downstream.’

‘For access to the site for the main logistics required you go up the Sepik River for 600 kilometres and then you need a road for another 100 kilometres, up to the actual mine site.

‘If you look at the terrain, it is relatively mountainous and it has a high level of rainfall all year round. That makes a challenging environment in terms of building stable structures and just undertaking the whole construction effort.’

Hess added that downstream of the project is ‘some 30,000 people who are very mindful and watchful of what is happening upstream’. He said it is ‘crucial not to jeopardise the livelihoods and environment for all those people downstream.’

Challenges

Hess said there are no port facilities capable of supporting the mine and no electricity grid. ‘There are no roads. We are significantly infrastructure-challenged in this location. That challenge represents an additional capital burden to the project.

‘When making an investment that is multi-billion dollar, you want to have confidence over those multiple political cycles that the policy environment will remain constant.’

‘Over the last four or five years there has been a significant decline in the price of copper and that represents a significant challenge to making an investment decision. Notwithstanding the recent jump, it still represents a long term challenge. What will the copper price be in order to support an investment decision?

‘The other major risk we face is the policy environment in which we invest. This project, to generate a return, will probably take at least two political cycles in PNG and to actually realise the benefits of those returns, many more political cycles.

‘When making an investment that is multi-billion dollar, you want to have confidence over those multiple political cycles that the policy environment will remain constant, support investment decisions and underpin confidence that we are doing the right thing by investing in PNG and not some other jurisdiction.’

Rewards

Hess added that the potential rewards are substantial, balancing the risk. He said the existing resource base of 2.5 billion tonnes of ore is ‘not closed off’ and that there are further opportunities.

‘We have a lot of confidence in developing the project. But I want to make it clear that we have to overcome a number of challenges.’

PanAust [owned by GRAM] controls 80% of the Freida River project, with Highlands Pacific the remaining 20%. As with all mining projects in PNG, the State has the option to buy in to up to 30% of the project prior to the granting 0f a special mining lease. PanAust applied for a Special Mining Lease in June 2016.

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Tibetans in anguish as Chinese mines pollute their sacred grasslands

Landscape along the road from Xining to Yushu in Qinghai province. (Giulia Marchi/For The Washington Post)

Landscape along the road from Xining to Yushu in Qinghai province. (Giulia Marchi/For The Washington Post)

With the Chinese expanding their mining interests in Papua New Guinea, is the pollution and desecration being suffered in Tibet a foretaste of the anguish to come in PNG? 

Simon Denyer | Washington Post | December 26 2016

High in western China’s Sichuan province, in the shadow of holy mountains, the Liqi River flows through a lush, grassy valley dotted with grazing yaks, small Tibetan villages and a Buddhist temple. But there’s ­poison here.

A large lithium mine not only desecrates the sacred grasslands, villagers say, but spawns deadly pollution. The river used to be full of fish. Today, there are hardly any. Hundreds of yaks, the villagers say, have died in the past few years after drinking river water.

China’s thirst for mineral ­resources — and its desire to exploit the rich deposits under the Tibetan plateau — have spread ­environmental pollution and ­anguish for many of the herders whose ancestors lived here for thousands of years.

The land they worship is under assault, and their way of life is threatened without their consent, the herders say.

“Old people, we see the mines and we cry,” a 67-year-old yak herder said, requesting anonymity for fear of retribution. “What are the future generations going to do? How are they going to survive?”

A local environmentalist, who also declined to be named to avoid backlash from the authorities, said he had done an oral survey of local opinion and found that Tibetans would oppose mining projects even if companies promised to share profits with local communities, to fill in mines after they were exhausted, and to return sites to their natural state.

“God is in the mountains and the rivers, these are the places that spirits live,” he said. “When mining comes and the grassland is dug up, people believe worse disasters will come. It destroys the mountain god.”

Salt deposits at the Jiajika lithium mine in Tagong township in China’s western Sichuan province, seen in August. Local herders have protested at least twice against the mine, saying it has polluted the Liqi River and killed fish and yaks downstream. (Simon Denyer/The Washington Post)

Salt deposits at the Jiajika lithium mine in Tagong township in China’s western Sichuan province, seen in August. Local herders have protested at least twice against the mine, saying it has polluted the Liqi River and killed fish and yaks downstream. (Simon Denyer/The Washington Post)

‘We just knew they had lied’

It was in 2009 that toxic chemicals from the Ganzizhou Rongda Lithium mine first leaked into the river, locals say, killing their livestock and poisoning the fish.

“The whole river stank, and it was full of dead yaks and dead fish,” said one man downstream in the village of Balang, who declined to be named for fear of retribution. Another pollution outbreak and a protest by villagers in 2013 forced the government to order production temporarily stopped, locals said.

“Then ... officials came to the village to try to persuade people,” the man said. “They said we have to have the mine but promised they would take time to fix the pollution problem before reopening it.”

But in April, just after mining restarted, fish began dying again, ­locals said. “That’s when we just knew they had lied,” the man said.

In May, residents staged a second protest, scattering dead fish on a road in the nearby town of Tagong. The protesters were surrounded by dozens of baton-wielding riot police. Again the government stepped in, issuing a statement to “solemnly” promise that the plant would not reopen until the “environmental issues” were solved.

But the problem at the Jiajika mine is not an isolated one. Across Tibetan parts of China, protests regularly erupt against mineral extraction, according to a 2015 report by Tibet Watch.

tibet-image

China is focused on copper and gold extraction from Tibet but is also exploiting a whole range of minerals “with increasing intensity,” including chromium, iron, lithium, iron, mercury, uranium and zinc — as well as fossil fuels such as coal, oil and natural gas, the report said.

Although China boasts of its ­development work in western ­regions where Tibetans live — hauling millions out of poverty and nearly doubling life expectancy over the past five decades — the report argued that much of the transport and other infrastructure in the region is aimed at extracting minerals rather than benefiting residents. Projects usually import workers from other parts of China, seldom employing Tibetans in significant numbers.

When protests break out, ­China’s response “has generally been heavy-handed,” with authorities seeking to politicize the protests, Tibet Watch wrote.

Understanding those risks, ­Tibetan communities sometimes use creative ways to get their message across.

When hundreds of people gathered in August 2013 in Zadoi county in Qinghai province to protest against mining on what they considered to be a holy mountain, they flew Chinese flags to demonstrate their loyalty to the state and erected posters and placards quoting President Xi Jinping’s words on the need to balance economic growth and environmental protection.

It didn’t help. Police and paramilitary forces arrived in large numbers and fired bullets above the crowd, according to campaigners at Free Tibet. The group said eight people were arrested and many more injured.

A camp at a lead and zinc mine in the high-altitude village of Xingniangda in the southern part of Qinghai province. Only Han Chinese work there. (Giulia Marchi/For The Washington Post)

A camp at a lead and zinc mine in the high-altitude village of Xingniangda in the southern part of Qinghai province. Only Han Chinese work there. (Giulia Marchi/For The Washington Post)

In the villages outside Xiaosumang township in Qinghai, residents blame a lead and zinc mine for the deterioration of the grasslands for miles around, and even for falling harvests of caterpillar fungus, a highly prized health cure that is the backbone of the local economy.

Contaminated water from the mine, residents said in a joint letter to the authorities in 2010, not only killed their livestock but also caused people who drank it to die of cancer, they said.

“Over the years, many herders would sigh and say: ‘Life can’t go on like this anymore. Even drinking has become a big issue for people living on the grasslands,’” the letter said.

A May 2009 protest in the village of Xizha prompted a severe crackdown, the letter said, with guns and tear gas used, seven women severely beaten, and 12 men blindfolded, detained and tortured.

Authorities threatened to cancel poverty-alleviation grants, including income and housing subsidies, if anyone in the region brought up the issue of environmental protection again, the letter said, adding that the crackdown “caused great fear to spread in our hearts.”

Whether the mine is truly the culprit for all the grasslands’ ills is another matter — climate change, for example, is probably an important factor. But that doesn’t soothe local anger.

“When I was young, there was more grass, more flowers, it was really beautiful here,” said a 27-year-old man in a valley downstream from the lead and zinc mine. “Now you see it’s less beautiful every year. People see all this and they are not really sure what happened, so they think it must be the mine.”

A woman washes clothes near the Jiajika lithium mine in Tagong township in China’s western Sichuan province. Local say the mine has polluted the Liqi River and killed fish and yaks. (Simon Denyer/The Washington Post)

A woman washes clothes near the Jiajika lithium mine in Tagong township in China’s western Sichuan province. Local say the mine has polluted the Liqi River and killed fish and yaks. (Simon Denyer/The Washington Post)

A conflict without end

In Jiajika, 300 miles to the southeast, the commercial pressure to reopen the lithium mine is mounting. The element is a vital component in rechargeable batteries used in cars, smartphones, laptops and other electronic and electrical items. Demand — and prices — are skyrocketing.

Last January, Youngy Co. Ltd., the parent company of Ganzizhou Rongda Lithium, promised investors that the local government would step up efforts to reopen the mine in March.

That same month, an article in the local Ganzi Daily newspaper outlined the authorities’ dream of making the area “China’s lithium capital,” calling Jiajika the biggest lithium mine in the world with proven reserves of 1.89 million metric tons and even greater ­potential. Three companies, including Rongda, will invest 3.4 billion yuan ($510 million) in the site by 2020, the article said.

He Chengkun, Youngy’s media officer, said an official investigation had established that the plant was not responsible for killing fish in 2013 or this year.

“The local government has made it clear it is nothing to do with our company,” he said. “They are looking into it and have already zoomed in on some suspects.”

He said the plant has been closed since late 2013 because of problems relating to land acquisition and denied that it had restarted operations in April, as locals claimed.

Nevertheless, across the Tibetan plateau, resource extraction, land grabs and environmental destruction remain flash points for conflict between Tibetans and the authorities, said Free Tibet Director Eleanor Byrne-Rosengren, reflecting both local grievances and the wider problem that Tibetans do not have the right to decide what happens to Tibet and its resources.

“Those resources feed the demands of Chinese industry instead of the needs of the Tibetan people,” she said. “That is why their environment is put at risk and their rights are trampled upon, and why we can expect to see this conflict played out repeatedly in the future.”

Xu Yanjingjing contributed to this report.

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Mining industry uses the same old false promises to sell Frieda river mine

The Frieda River mine in the Sepik will enhance PNG’s prosperity, claims Fred Hess. Just like Panguna did for Bougainville, Ok Tedi has done for Western Province and Porgera is doing for Enga, Mr Hess?

Anyone with the slightest interest in evaluating Fred Hess’s claims should visit Arawa, Wabag and Daru and see how the same claims by made by Rio Tinto, Barrick Gold and BHP have proved to be false.

And don’t be fooled by Hess’s claims that the Frieda river mine will be constructed and operated by PanAust and Highlands Pacific. The mine is owned and will be operated by the Chinese company Guandong Rising Assets Management (GRAM).

Now why is Mr Hess so keen to hide that little fact?

Delly Waigeno | EMTV News | 9 December 2016

The Frieda River Project in West Sepik will contribute to enhancing the prosperity of Papua New Guinea.

Dr. Fred Hess, Managing Director of PanAust said this when talking about the risks and rewards of this project.

Frieda River has the largest known gold and copper deposits in the world with over 2 billion tonnes, and the O’Neill-Dion Government has committed to assisting the project at its various stages of development.

Dr. Hess said the Frieda River Project is one that’s been known for about 50 years. PanAust and its joint venture partner, Highlands Pacific are aiming to bring the project into development very soon.

They have already submitted a special mining lease application.

Prime Minister, Peter O’Neill, said the government was committed to the project.

The Project is a substantial open cut mining operation, dominated by a large storage facility.

Dr. Hess said the project will generate substantial revenue that will be shared around a number of stakeholders including; local communities, provincial government, the national government, the company and its shareholders who will all benefit from this project going forward.

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Stars may align for [another] giant Papua New Guinea copper mine [disaster]

The Frieda river will be polluted, destroying the region’s rainforests and Sepik River’s swamps and staple sago trees downstream

Another social and environmental disaster in the making?

James Regan | Reuters | December 8 2016

After nearly 50 years on the drawing board, the latest backers of Papua New Guinea’s $3.6 billion Frieda River copper project say the time may finally be right for the giant mine – even if some hurdles remain.

Regarded as one of world’s largest untapped copper-gold resources, the deposit has sat dormant as successive owners, including some of the world’s biggest mining houses, proved unwilling or unable to spend the billions of dollars needed to construct a mine in remote jungle far from the country’s coast.

Current owner PanAust Ltd, a former listed Australian miner now a unit of China’s Guangdong Rising Assets Management (GRAM) , has submitted an application for a special mining licence to the PNG government for an initial $3.6 billion project.

PanAust managing Director Fred Hess points to the success of ExxonMobil’s $19 billion liquefied natural gas plant, which has been running for two years in a country known for its difficult terrain, lack of infrastructure and sometimes fractious landowners.

“It gives the backers of Frieda River the confidence that we can get all of this together and finally make it a reality,” Hess told Reuters at a mining conference on investment in the Pacific country.

Bankers, too, are pencilling in Frieda River as one of a number of projects likely to be needing financing.

“The first stage of Frieda River is $3.6 billion. The second phase is another $2.3 billion on top of it,” said Wai Mun Lum, ANZ’s head of mining and resources infrastructure, project and export finance.

“We do really feel quite excited about opportunities in PNG that will be coming up in the project financing space.”

Analysts say factors in the project’s favour include a forecast world shortage of copper in coming years, China’s desire to secure supplies and the sheer scale of the project.

“Now more than any time before, Frieda River could see the light of day,” said Gavin Wendt, analyst for MineLife in Sydney, who ranks the deposit among the next generation of mega-projects.

SPEED BUMPS AHEAD

Papua New Guinea once supplied millions of tonnes of copper ore to smelters in Asia and Europe in the 1980s and 1990s.

Rio Tinto was run off the restive Bougainville Island in 1990 by residents who wanted to reintroduce an agrarian society.

A decade later BHP Billiton relinquished ownership in the Ok Tedi mine to a government trust following claims by landowners over toxic mine waste in local waterways.

PNG Prime Minister Peter O’Neill, facing an election in mid-2017, has made foreign investment in new resource projects a priority for his administration as he seeks to boost growth .

“Frieda River is a very important project for my country,” O’Neill told Reuters at the conference.

But hardheaded financing decisions are still to be made.

PanAust says it is unlikely to be issued a special mining licence needed to proceed to the initial phase of development, before next year’s election.

“Our timing hasn’t been all that good,” said Hess. “Once the election is over and there is a mandate from the government, things will begin to move smoothly,” he said, but added the caveat that there was “quite a way to go” before an investment decision was made.

Bankers also cautioned that proposed changes to mining laws are creating uncertainty, while the project will need deep pockets to build port and power facilities and an air strip, with the likely backers unlikely to have the funding capacity of an ExxonMobil.

Even with a quick go-ahead, Highlands Pacific, which has a 20 percent stake in the project, says the current timeline would include two years for approvals and six years for construction, meaning first production no earlier than 2024/25.

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How the international financial vultures view Papua New Guinea

vultures

Lenders flag policy, infrastructure challenges to PNG mines

  • Need for ports, power, roads raises costs
  • Chinese banks boost miners’ access to money
  • Miners fear security risks, lenders undaunted

Sonali Paul | Reuters | 8 December 2016

Planned changes to Papua New Guinea’s mining laws are creating uncertainty ahead of an upcoming election, despite strong interest in proposed multibillion dollar mining and energy projects in the Pacific nation, lenders and advisers say.

The quality of the copper, gold and gas resources in the country mean there is appetite to lend to projects including Total SA’s Papua liquefied natural gas project, Guangdong Rising Assets Management’s (GRAM) Frieda River and Newcrest Mining and Harmony Gold’s Wafi Golpu copper and gold mines.

However Australia and New Zealand Banking Group and Credit Suisse bankers said uncertainty over elections in mid-2017 and proposed government mining and energy policies may affect the size and pricing of loans.

Planned changes include shortening mine leases to 25 years from 40 years, giving the state the right to acquire a project for half its sunk cost after the first phase, an increase in royalties to 3 percent and a doubling of the production levy to 0.5 percent.

PNG Prime Minister Peter O’Neill told a conference in Sydney he would not go ahead with any changes to the mining law ahead of national elections in June 2017, and would await a new mandate in parliament.

But the uncertainty is putting pressure on the nation’s sovereign rating, which would affect lending terms.

“When we assess the risk and when we assign risk ratings to projects, to the extent that the sovereign rating is under pressure or downgraded, ultimately that translates to a higher cost of funds to the borrower,” said ANZ’s head of mining and resources infrastructure project and export finance Wai Mun Lum.

The PNG Chamber of Mines and Petroleum has warned that the proposed mining law changes could make the Frieda River and Wafi Golpu projects unviable.

INFRASTRUCTURE CHALLENGES

The main attraction of Papua New Guinea is the sheer size of the deposits, which are tucked away in remote, mountainous regions with limited infrastructure.

“I talk to investment banks, and they’re all keen to remain on top of what’s happening in PNG. They see the opportunities, and they’ll all be there,” said Anthony Latimer, a partner at law firm Norton Rose Fulbright on the conference sidelines.

But in a country where the only airport with runway lights is in the capital, Port Moresby, lack of infrastructure poses a big challenge. For a company like ExxonMobil building the $19 billion PNG LNG project, a mammoth four-year task which it likened to constructing on the moon, that was doable.

ANZ’s Lum said for smaller companies like GRAM’s PanAust looking to build the Frieda River mine, it would be a bigger challenge to fund port and power facilities and an air strip.

However where western bankers fear to tread, China’s big banks are pouring in, bankers and advisers said.

“The recent joint venture between Zijin and Barrick for Porgera (gold mine) is going to be very good for PNG,” said Graham Smith, associate director of mining M&A at KPMG.

“We’re seeing the Chinese banks have a very different risk appetite than some of the western banks for jurisdictions such as PNG, as well as lower debt costs generally.”

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State urged to hold off project agreement on Frieda

A LAWYER and a former MP have urged the Government to hold off the project agreement on the Frieda copper and gold project until after the general election next year.

Former Maprik MP in East Sepik Sir Pita Lus and lawyer Alois Jerewai said it should be left to the leaders elected in 2017.

“The mandate of the Government and the East and the West Sepik provincial governments have only less than one year to expire.

“Therefore the decision in relation to the terms and conditions of the Frieda mine project must be left to the leaders after the 2017 general elections,” Jerewai said.

“It concerns us that the Government under the stewardship of Prime Minister Peter O’Neill is rushing to have the Frieda mine brought into operation to sustain the seriously falling economy of Papua New Guinea at any cost.”

He said the biggest cost would be the ecological impact on the Sepik River basin and the tributaries which support and sustain almost half a million of people.

“In the event that the mine is rushed into operation without proper scrutiny by our current leaders, the Sepik people will be the ones who will suffer the most,” Jerewai said.

Sir Pita called on the Government, the Mineral Resource Authority and the Conservation and Environment Protection Authority to provide the proposed or the actual mine waste management and disposal plan to the provincial governments for assessment by their own scientists and engineers.

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Onus on Chinese to build a safe dam if large Sepik mine proceeds

Vanimo Harbour, West Sepik, Papua New Guinea. Photo: RNZI / Johnny Blades

Vanimo Harbour, West Sepik, Papua New Guinea. Photo: RNZI / Johnny Blades

Minister’s advisor has ‘fingers crossed’ the Chinese do the right thing and we don’t end up with another Ok Tedi. VERY REASSURING!

Radio New Zealand | 25 November 2016

The onus is on a Chinese developer to build a safe tailings dam if it proceeds with developing Papua New Guinea’s Frieda River mine.

A feasibility study was recently completed for the copper and gold mine in West Sepik province for which Chinese-owned company PanAust has lodged a special mining lease application.

The study unearthed an even larger copper deposit than previously estimated.

However, local communities are worried about potential mine tailings polluting the major Sepik River system.

Katherine Karaya, the first secretary to the Mining Minister Byron Chan, said the government acknowledges the need to have sound environmental expertise incorporated before the mine is developed.

“Well let’s hope that the Chinese do a good thing, the right thing, to build a dam,” she said.

“Let’s keep our fingers crossed. They say they can do it, they’ve done it before in China, so let’s wait and see. Only time will tell whether they can prove they can do it, or if not there’s going to be another lawsuit like the Ok Tedi thing.”

Ms Karaya said the Environment Minister would have to be satisfied with the miner’s plans before a mining license is granted.

A pre-requisite for a license, according to the Mineral Resources Authority, is an environmental permit approved by PNG’s Conservation and Environment Protection Authority.

The MRA has also said PanAust would build a damn that would be part of PNG’s largest land tailings storage facility to ensure tailings are not dumped in the Sepik River and its tributaries.

The facility could double up as a hydro power damn for generating electricity.

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