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Citigroup limits financing for mines that dump tailings at sea

Jim Tan | Mongabay | 12 June 2018

  • Following pressure from advocates, Citigroup said last month that it will not fund any future mining projects over $50 million that dispose of mine waste in the oceans.
  • Tailings, a fine-grained, often toxic slurry left over after the processing of mined ore, are still disposed of in oceans, lakes and rivers in several countries.
  • Mines in Papua New Guinea, Norway and Chile are proposing to dispose of tailings in the ocean.
  • Local communities are often most affected by pollution from mines and have vocally opposed tailings disposal in the ocean in Norway and Papua New Guinea.

Several mines around the world dispose of potentially toxic mine waste directly into the ocean. Environmentalists have criticized the practice, arguing that the waste smothers ocean habitat and leaches harmful chemicals and heavy metals that can poison marine life. Last month Citigroup, a major shareholder in four mining companies that either actively dispose of mine waste into the ocean or propose to do so, agreed not to finance any new operations that pipe mine waste into the sea.

Citigroup’s move comes after pressure from an international coalition of NGOs that launched a campaign this year to end the disposal of mine waste in natural water bodies. The coalition, led by the Washington, D.C.-based environmental NGO Earthworks, is calling for a global ban on the practice and pressuring financial institutions to stop funding mining operations that engage in it. Earthworks announced Citigroup’s move in a May 2 press release.

“Citi’s decision says loud and clear: ocean dumping is dirty, unnecessary and wrong,” Ellen Moore, who coordinates the Ditch Ocean Dumping campaign for Earthworks, told Mongabay.

There are few signs of life on the bottom of Jøssingfjord in southern Norway 35 years after dumping ceased at the Tellnes titanium mine. Scientists believe it may never recover. Image by Erling Svensen.

Toxic tailings

One of the key problems miners face is how to safely dispose of the huge quantities of waste rock and tailings produced in the mining process. The tailings, a fine-particle slurry left over after the target metal has been extracted from the mined ore, are particularly tricky to handle. Tailings often contain potentially harmful chemicals used to process the ore, like cyanide and petroleum, as well as by-products like sulphuric acid and heavy metals like lead.

Nowadays, the vast majority of the world’s 2,500 industrial-scale mines dispose of their waste on land. But several mines still dump into water bodies, including at least seven into the ocean, in Papua New Guinea (PNG), Indonesia, Turkey and Norway; at least three into rivers, in PNG and Indonesia; and at least five into lakes in the U.S. and Canada, according to a non-exhaustive list from Earthworks. The group calculated that mines dispose of more than 220 million metric tons of waste in water bodies every year — enough, the group says, to fill 55 sports stadiums.

“Although mine waste dumping in water has been phased out in many parts of the world, mining companies still use it, governments still allow it, and the world’s largest banks and investment firms still profit from it,” Moore told Mongabay.

This is partly the result of geography. In Norway, suitable and stable terrestrial locations to store mine tailings are hard to find because of the mountainous terrain. In PNG, mines face a similar problem and must also contend with frequent earthquakes and flooding during the rainy season that can destabilize tailings dams.

Tailings pipes from the Marcopper mine in Marinduque, the Philippines, enter the sea at Calancan Bay. Image by Catherine Coumans/MiningWatch Canada

It is now widely accepted that tailings disposal can have a catastrophic impact on rivers and the creatures that live there. But the effect of tailings disposal in the ocean is somewhat more contentious.

Companies including Oslo-based Nordic Mining, which proposes to pump tailings from a rutile mine into Førdefjord, a fjord in southwestern Norway, suggest that deep-sea tailings disposal can be safe. They argue that, due to the layered nature of the ocean, so long as tailings are piped deep enough, ocean currents will not spread them, and their impact on marine life will be minimal and localized.

Charles Roche, executive director of the Mineral Policy Institute, an Australian NGO that assists communities affected by mining and is a signatory to the campaign, is less convinced. He points to the very limited peer-reviewed literature as evidence of the impact of submarine tailings. Two studies conducted around the Lihir gold mine in PNG found fewer deep-water fish and reduced marine life on the sea floor compared to the surrounding areas.

Part of the problem is that there is very little independent research into the effect of submarine tailings disposal, Roche told Mongabay.

“Research into submarine tailings is generally done by or for proponents [of submarine tailings disposal],” he said.

Many of the studies are environmental impact assessments conducted on behalf of mining corporations applying for a licence to operate and are rarely publicly available, according to a 2015 article in Oceanography magazine.

The lack of peer-reviewed research on the topic is a problem for Lisa Levin, an oceanographer with the Scripps Institution of Oceanography in California. A 2015 review she co-authored in Marine Pollution Bulletin suggests that a major reason is the high cost of conducting research in the deep sea.

Despite the limited research, Levin is also convinced tailings disposal has a negative impact on the ocean. “It will never be good for marine ecosystems,” she told Mongabay.

Citigroup acts

Citigroup, a multinational investment bank and financial services corporation based in New York, is among the top 20 largest financial institutions in the world, with total assets of $1.84 trillion in 2017.

Citigroup’s business is split into two divisions: consumer banking under the Citibank brand, and investment banking. It was Citigroup’s investments that attracted Earthworks’ attention. Citigroup is the third-largest shareholder in the Australian mining companies Highlands Pacific and St. Barbara Limited, which Earthworks says have together disposed of 54 million tons of toxic tailings in the ocean around PNG. Citigroup also holds shares in Norway-based Nussir ASA and Nordic Mining, which have both proposed disposing of tailings at sea in Norway.

Fishing boat on Repparfjord, Norway, where Norwegian mining company Nussir ASA proposes to dispose of tailings from a copper mine. Image by Kjerstin Uhre.

The campaign wrote an open letter to Michael Corbat, Citigroup’s CEO, in January 2018 asking the bank to sever ties with companies that dispose of waste at sea.

“Citi was immediately responsive after we launched the public campaign,” Moore told Mongabay. “It was clear that the bank did not want to be associated with the harmful and outdated practice.”

Following negotiations, Citigroup revised its Environmental and Social Policy Framework to state:

“Citi will not directly finance new mining projects … that utilize submarine waste disposal.”

The policy will only apply to future projects requiring corporate loans over $50 million, and does not apply to the bank’s brokerage business, which holds shares on behalf of clients.

When asked about the company’s new policy, Citigroup spokesperson Laura London responded:

“Citi has a comprehensive Environmental and Social Risk Management Policy that covers our business with a range of sectors, including the mining sector, and we carefully review any sensitive environmental and social impacts of activities we finance, in line with our global standards and good industry practice.”

London declined to respond to detailed questions, and the bank has not publicly announced the move itself.

Roche welcomed Citigroup’s policy change, but he recommended the bank “extend the policy and prohibit any involvement, including company or nominee shareholdings, of riverine and [marine tailing disposal projects].”

Nevertheless, Moore believes this quick win for her campaign is the first step in the right direction. She said Citigroup also agreed to add companies that dispose of mine waste in lakes, rivers or the ocean to the bank’s internal watchlist and subject them to tighter scrutiny.

Levin agrees that Citigroup’s move is significant.

”[Citigroup’s] policy certainly helps to raise awareness of the negative effects of submarine tailings disposal,” she said. “Because the economic sector drives so much of human behavior I believe it is an important first step to engender change.”

The campaign is also targeting the multinational financial institutions Bank of America, Credit Suisse and J.P. Morgan, contending that they also “have ties” to mines that dispose of waste into water bodies.

Local communities pay the price

View of the Ramu Nickel mine refinery where mine waste is disposed of into the ocean in Papua New Guinea. Image by Christopher McLeod/Sacred Land Film Project.

When mine tailings cause environmental damage, it is often local communities and indigenous groups that pay the highest price. Moore is critical of brokerage businesses, such as Citigroup’s, that hold so-called nominee shares for clients, which can be used to shield the clients’ identities. She said that if affected community groups could identify shareholders and then communicate their concerns directly to them, it would make a difference.

In PNG, tailings from the Tolukuma gold mine resulted in elevated levels of arsenic, lead and mercury in the drinking water and flooded croplands for communities downstream, according to a 2013 report prepared for the International Maritime Organization and the United Nations Environment Programme. The report also notes anecdotal reports from local communities of increased illness and deaths after drinking and bathing in the river where the mine disposed of its tailings.

In both PNG and Norway, local community groups have been vocal in their opposition to the disposal of tailings at sea. Landowners in PNG attempted to prevent the Ramu Nickel mine, majority owned by the Metallurgical Corporation of China, from dumping its tailings in the sea through a class action lawsuit, but were unsuccessful. In Norway, Saami indigenous people have frequently voiced their opposition to proposals by Nordic Mining and Nussir ASA to dispose of tailings in Førdefjord and in Repparfjord, in the northern part of the country.

“It is illogical and immoral to sacrifice our traditional, sustainable and profitable fisheries for an uncertain mine project that relies on outdated practices to turn a profit,” said Silje Karine Muotka, a member of the Saami parliament, in Earthworks’ press release.

Nevertheless, both projects appear to be moving forward.

Citations

Brewer, D.T., Milton, D.A., Fry, G.C., Dennis, D.M., Heales, D.S., & Venables, W.N. (2007). Impacts of gold mine waste disposal on deepwater fish in a pristine tropical marine systemMarine Pollution Bulletin 54(3): 309-321.

Hughes, D.J., Shimmield, T.M., Black, K.D., & Howe, J.A. (2015). Ecological impacts of large-scale disposal of mining waste in the deep seaScientific Reports 5:9985.

Ramirez-Llodra, E., et al. (2015). Submarine and deep-sea mine tailing placements: a review of current practices, environmental issues, natural analogs and knowledge gaps in Norway and internationallyMarine Pollution Bulletin 97(1-2):13-35.

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Extractive Industry Giving Little Yet Enjoying Good Tax Concessions

“the relatively meagre assistance allocated to the village communities they have displaced is quite frankly shameful”

Frankiy Kapin | Post Courier | May 31, 2018

A company owned by mine site landowners of Bulolo district in Morobe province has accused the highly lucrative extractive industry of PNG of giving very little while enjoying the generous tax concessions offered by the government.

General manager of NKW Holdings Limited David Stewart said the extractive industry enjoys generous tax concessions, yet it is providing very minimal benefits to local communities.

The NKW is the umbrella company of the three Hidden Valley mine landowner investment companies of Nauti Investment Ltd, Kwembu Investment Ltd and Winima Investment Ltd in Wau, Bulolo district of Morobe province.

NKW owns almost K90 million in assets and employs approximately 17 expatriates and 500 national staff.

In the last six months, NKW has paid in excess of K40 million as goods and services tax (GST) on every kina spend.

“It is fair to say whilst there is considerable press devoted to the economic benefits of large mine operations and the small community programs they initiate, the relatively meagre assistance allocated to the village communities they have displaced is quite frankly shameful.

“At less than two per cent of revenue is hardly an equitable distribution of benefits,” Mr Stewart said.

He said evidence suggests that benefits to local communities that own the mine lands are minimized or watered down over time.

He said the constitutional landowners in PNG bear the cost of having the mines on their land but revenues will generally revert to the national government.

Mr Stewart said the NKW recognises that the mine has a finite life and generally do not develop the communities that own the land.

“If it was genuinely otherwise; the education and health standards in affected communities would be considerably higher. To quote a former Australian Prime Minister, “the streets should be paved with gold,” he said.

He said if they don’t develop sustainable businesses that will continue after the mine closure as the landowner group then they will have failed their duty.

As part of the company’s sustainable diversification program, NKW Fresh was established in 2014.

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Mining industry scrambling to find new ways to spin its benefits

Wafi Golpu’s Craig Jones. Source: BAI

“Papua New Guinea currently receives more income tax from resource company employees than it does from the companies themselves”

Wafi Golpu mine would be good for the wider Papua New Guinea economy, says executive

 David James | Business Advantage | 22 May 2018

The proposed Wafi Golpu mine will contribute to the diversification of Papua New Guinea’s economy, according to Craig Jones, Executive General Manager Wafi Golpu at Newcrest Mining. He told the Australia Papua New Guinea Business Forum in Brisbane that, if the project gets the go-ahead, it will help local agriculture.

Jones’ comments reflect a growing inclination among resources companies to present their operations as being good for the overall economy, not just good business.

‘There are many opportunities for the mining industry to contribute to the diversification of the Papua New Guinea economy through smart and sustainable development,’ Jones said.

‘Wafi Golpu is a case in point, as the development of the mine’s infrastructure paves the way for a substantial agricultural industry.’

Jones pointed to proposed new roads that will ‘open up’ the region, from the Highlands Highway to the Bulolo Highway.

New infrastructure for the Wafi Golpu mine, a joint venture project between Newcrest and Harmony Gold, could create the opportunity for up to 10,000 hectares of land in the Watut River valley to be used for agricultural purposes.

‘The joint venture has a strong focus on unlocking Morobe’s agribusiness potential.’

Diversification

Jones’ emphasis on stimulating local, non-resource industry benefits may be designed to counter critics within PNG who argue that extractive companies do not pay sufficient tax and that the tax laws should be changed.

As the Executive Director of the Institute of National Affairs, Paul Barker, noted in the forum, according to the Extractive Industries Transparency Initiative, the State currently receives more income tax from resource company employees than it does from the companies themselves.

The emphasis on economic diversification also appears to be a response to statements by PNG leaders, including Prime Minister Peter O’Neill and central bank Governor Loi Bakani, that PNG urgently needs to diversify its economic base to withstand the boom and bust cycles that routinely occur with resource industry projects.

Jones said, however that the extractive industries are ‘likely to remain critical to the future’ while such economic diversification is being undertaken.

He said the extractive industries account for 84 per cent of the total exports of PNG, with 45 per cent from oil and gas, and 39 per cent from mining in 2016.

Exports

Jones said Newcrest’s Lihir gold mine contributed about K3.5 billion in export revenue in 2016.

‘If it proceeds, the potential annual revenue from Wafi Golpu is expected to exceed even Lihir when it reaches peak production, with average free cash flows projected to be around US$900 (K2.92 billion) per annum.

‘This goes on for about the first 10 years after the beginning of commercial production.

‘It would make Harmony and Newcrest very significant contributors to the growth of the Papua New Guinean economy.’

Policy

Jones noted that the Wafi Golpu project requires very significant upfront investment and has very long lead times for its return on investment.

He said there will be K16.7 billion (US$5.14 billion) invested over the life of the mine if it gets the go-ahead.

‘This is why a stable investment and legislative environment is so crucial for the development of Wafi Golpu and other mineral projects.

‘There are currently policy issues that remain a concern for our industry.

‘Apart from the highly debated contributions made by resource companies in company tax there are many other contributions that resource companies make and many of them are voluntary.

‘These benefits have a direct impact on the lives of Papua New Guineans.’

Multiplier effect

Jones pointed to Lihir’s investment in infrastructure, including schools, roads, bridges, Lihir airport, Lihir medical centre, water and sanitation projects.

He said K23 million was channeled through the PNG government’s tax credit scheme ‘which has been an effective vehicle’ for delivering rural value in New Ireland Province.

‘On top of royalties we paid K82 million to landowners and local and provincial governments, PNG employees earn K189 million in wages and one of the most substantial economic flows from the mine is the almost K1 billion paid to local businesses and suppliers to support the mine’s operation.

‘These are the economic drivers that have a multiplier effect on the economy.’

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Aussie taxpayers chipping in for mining giant

Millions of dollars from Australian taxpayers are being spent to seal the Boluminski Highway in New Ireland, in the shadow of the giant Lihir gold mine run by Newcreat Mining.

In total the Australian government is spending $400 million on Phase 2 of its Transport Sector Support Program in PNG.

Australian taxpayers are footing the bill for infrastructure PNG’s huge foreign-owned mines were supposed to pay for.

Boluminski Highway sealing underway

PNG Loop | April 27, 2018

Works are well underway in New Ireland on a major project to reconstruct 32.4 kilometres of the Boluminski Highway between Pinatgin and Loloba.

The K39.4 million project is being delivered through the Papua New Guinea – Australia Partnership, with the support of the New Ireland Provincial Government.

Australia is committed to supporting a prosperous Papua New Guinea. Works along the Boluminski Highway will help business and local communities access markets and services and boost the tourism industry in New Ireland Province.

Department of Works Secretary, David Wereh, is pleased to see the project progressing well.

“This is an important project on an essential economic corridor for Papua New Guinea. The project will nally link the centres of Namatanai and Kavieng with 265km of sealed maintainable road.

“This will be a signi cant achievement made possible through a long term commitment by the Papua New Guinean and Australian governments,” he said.

More than 140 local residents are employed on the project and works are expected to be completed by the end of December 2018.

The project is being delivered through the Papua New Guinea – Australia Transport Sector Support Program.

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K5M Projects For Nimamar As Sir Julius Fires Broadside At Lihir Gold Mine

Chan: “We will light up the islands and shame the mining giant with the glow of our solar street lights” 

Post Courier | April 26, 2018

Traditional dance groups added colour to the launching of nearly K.5 million worth of projects for five wards in the Nimamar LLG on Malie Island in the Lihir group last Saturday.

The projects include 60 solar street lights to light up village communities in the four island wards from Malie, Masahet and Mahur.

But three boats and one sawmill marked the biggest village impact projects rollout that came under two project initiatives of the New Ireland Government – the Ward Level Project Policy and the Lighting Up New Ireland Policy’

Governor Sir Julius Chan, deputy governor and president of the Nimamar LLG, Ambrose Silul, PEC and provincial assembly members, shipping operator Michael Chan from Vanmak Shipping and staff from the governor’s office and Nimamar LLG gathered with the people to witness the occasion.

Sir Julius had the chance to meet with his people in the electorate. He was at Lambom to launch seven sawmill projects for the Konoagil wards last Thursday with the president James Pandi and then joined president Silul on Saturday to wind up the week.

He told the Lihir people that the Lihir gold mine is the third largest in the world and yet after 20 years in operation Lihir still was without a sealed ring road up until only three years ago, and no power to the inhabitants, even to the islands.

“We recognise that a lot of money for the province comes from Lihir so today I am happy to join with Ambrose so we can put something back to the place of origin. So we will light up the islands and shame the mining giant with the glow of our solar street lights and show that even though the the mine is not forthcoming, this government cares and does what we can to better the lives of our people”

Sir Julius said he’s optimistic of a better deal for the people in the negotiations under the MOA revision that will increase the mining royalty from the current 2% to 10%.

“We fight to put wealth in the hands of the people. Development won’t come if people have no money. If the people are rich the country is rich.”

He encouraged the people to rally behind their president who has been part of the major policies that have impact the province and elect good leader in the coming LLG elections.

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Harmony adamant that can find funding for Wafi-Golpu project

Picture: PHILL MAGAKOE

Allan Seccombe | Business Day | 19 March 2018

Harmony Gold will have to find $1.41bn to fund its stake in the Wafi-Golpu copper and gold project in Papua New Guinea over five years once it secures a mining right, but management said it would keep the mine and that it was fundable.

Harmony CEO Peter Steenkamp has since last year spoken of exploring options to realise value from the project, with deep scepticism from shareholders and analysts about Harmony’s ability to financially participate in the project. The project has not been reflected in Harmony’s share price.

The options Harmony was exploring included an outright sale of its 50% stake in the undeveloped Wafi-Golpu deposit, bringing in a partner to share the costs and rewards, or keeping its share, with the potential decrease in capital expenditure if the Papua New Guinea government exercised its right to a 30% stake in the venture.

On Monday, Steenkamp said it was a project Harmony wanted to keep and that the new feasibility study showed it to be one that Harmony could fund along with Australia’s Newcrest Mining.

“We are delighted with the results of the feasibility study,” Steenkamp said.

The cost of building the mine and all associated infrastructure like on-mine power generation, pipelines to the coast and processing plants rose to $2.825bn from $2.67bn in the 2016 study, but the overall cost of the project, including sustaining capital gave a total life of project capital bill of $5.38bn, down from $6.38bn before.

Harmony FD Frank Abbott said during a media briefing that Harmony would fund the first three years of construction off its balance sheet, using cash flows from its mines in SA and the restarted Hidden Valley gold and silver mine in Papua New Guinea.

For the next two years Harmony would need funding and plans for that expenditure would be finalised in the next 12-18 months waiting for the Papua New Guinea government to grant the project a special mining lease.

The projections are for the project to start positive cash flows from the seventh year and for it to generate $1bn for the partners from year eight, which for Harmony means $500m if the Papua New Guinea government doesn’t take up its option, said Abbott.

African Rainbow Minerals, a 15% shareholder in Harmony, has been touted as a potential partner or buyer of Harmony’s stake, but Steenkamp declined to comment whether ARM, which is on the hunt for copper after pulling out of a Zambian mine, would be included.

One of the potentially controversial aspects of the proposed mine is the option to dump tailings in the sea rather than setting up tailings deposition sites on land, which the study showed to be fraught with problems and risk.

There are three mines in Papua New Guinea pumping their tailings in the sea, said Johannes van Heerden, the head of Harmony in South East Asia, arguing it was a viable and acceptable option that the partners had explored with local authorities.

The project, which will deliver on average 161,000 tonnes of copper and 266,000oz of gold a year, will be one of the lowest cost copper and gold mines in the world, Steenkamp said.

The boards of Harmony and Newcrest will finalise and approve the study once they have secured the special mining lease from the Papua New Guinea government.

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PNG gold and copper mine to cost JV partners an extra $1bn upfront

Newcrest managing director Sandeep Biswas. Philip Gostelow

Darren Gray | Sydney Morning Herald | 19 March 2018

Newcrest Mining will plough an an extra $US1 billion ($A1.3 billion) in upfront capital into developing a new gold and copper mine in Papua New Guinea.

Australia’s biggest gold miner released the estimate for the Wafi-Golpu project on Monday showing total capital expenditure for the life of mine,  situated about 65 kilometres south west of PNG’s second-biggest city Lae,  would fall by about the same amount to $US5.38 billion.

The cost of the project will be split between Newcrest and Harmony Gold Mining Company.

The Wafi-Golpu project is a key part of Newcrest’s future, and is considered the company’s top growth asset. It has an expected “life of mine” of about 28 years.The updated feasibility study estimates it would produce on average about 161,000 tonnes of copper per year, which is about double the group’s copper guidance for fiscal 2018. The study estimates it would produce about 266,000 ounces of gold per year.

Newcrest attributed the higher upfront capital cost, relative to earlier studies, to the “adoption of deep sea tailings storage” to deal with tailings from the mining operation, construction of an on-site power plant, a larger processing plant and a deeper and larger initial block cave.

In a statement the company said its latest feasibility research identified deep sea tailings storage as the preferred option for managing tailings, and came after examination of 45 possible sites considered for land-based tailings storage dams or dry-stacking sites.

Newcrest highlighted a number of disadvantages from using a land-based storage, determining that the amount of storage volumes required “would result in a large disturbance footprint over an area which can have high traditional heritage and economic value, high biodiversity, and/or displacement of communities and their livelihoods”.

The miner also cited the project area’s “high seismicity and complex geology, including active faulting, which could at some sites result in liquefiable soils. Complex design would be required to partly mitigate such factors, and that would carry high risk and high cost in both construction and ongoing operation.”

The area’s high rainfall was also mentioned, a factor requiring costly and significant management and treatment plans. “Any structure would contain very large amounts of water with commensurate risks.”

The Wafi-Golpu update comes less than two weeks after mining operations at Newcrest’s Cadia mine in NSW were suspended because of a slump in a tailings dam wall.

Executive project director Bryan Bailie told Fairfax Media in an interview from PNG that the selection of deep sea tailings placement as the preferred option for tailings management “had nothing to do” with the recent Cadia dam incident.

Mr Bailie said the PNG government recognised the potential of the project to make a significant economic and social contribution to PNG.

“If developed the project is expected to create economic benefits across Papua New Guinea and the Morobe province, including an estimated 2500 direct jobs during construction and about 850 during operations.

“The project will also contribute at a local, provincial and national level through the payment of royalties and taxes, through social investment programs etcetra,” he said.

“In all the time that I’ve certainly been involved in the project the PNG government has been very supportive of this project, the local communities are the same,” he said.

Newcrest managing director Sandeep Biswas said the company had a clear path forward for the project.

“The improved business case set out in the updated Feasibility Study clearly demonstrates the world-class nature of this multi-decade project,” he said.

Shares in Newcrest rose two cents to close at $19.75.

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