Tag Archives: Newcrest Mining

UBS says Newcrest Mining could write down Lihir by $2.5b

UBS analysts reckon Newcrest Mining could be gearing up for a $2.5 billion writedown of its troubled Lihir gold mine in Papua New Guinea. Rob Homer

UBS analysts reckon Newcrest Mining could be gearing up for a $2.5 billion writedown of its troubled Lihir gold mine in Papua New Guinea. Rob Homer

Sarah Thompson, Anthony Macdonald, Jake Mitchell | Australian Financial Review

UBS analysts reckon Newcrest Mining could be gearing up for a $2.5 billion writedown of its troubled Lihir gold mine in Papua New Guinea.

Analyst Jo Battershill said Newcrest’s carrying value of $6.1 billion for Lihir, assumes a $US1300 an ounce gold price, which compares with the current price of $US1090 an ounce.

“Based on sensitivities provided in NCM’s FY14 Annual Report, a US$100/oz reduction in the gold price assumption lowers the carrying value by $1.24 billion – so we think a potential $2.5 billion write down is possible,” Battershill said in a research note to clients.

Blue Ocean Equities analyst Steuart McIntyre said in April that if an assumed gold price of $US1200 an ounce was used then Lihir would likely be written down by $2.2 billion.

Newcrest reported strong production numbers for the June quarter on Thursday, with Lihir accounting for 30 per cent of the company’s output of 647,000 ounces.

“Our analysis shows that Lihir has generated just $330m of FCF (free cash flow) since Newcrest acquired it – which we consider a poor outcome for investors,” Battershill said.

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Namosi landowners welcome decision to put on hold gold and copper project

Watisoni Butabua | Fiji Village

Tikina Namosi Landowners Committee Spokesperson Sipiriano Nariva

Tikina Namosi Landowners Committee Spokesperson Sipiriano Nariva

The Tikina Namosi Landowners Committee has welcomed the decision that the Namosi gold and copper project is currently on hold.

Spokesperson Sipiriano Nariva believes their concerns have been heard.

Nariva says they have always raised concerns on the plight of the landowners and also the Environmental and Social Impacts of the project.

He says because they are worried about their future generation they have requested the relevant authorities to discontinue the project.

Prime Minister Voreqe Bainimarama says the project is on hold because they have not met the necessary environmental protection conditions.

Bainimarama says they have put the preservation of the environment first.

Meanwhile, the Namosi Joint Venture Country Manager Greg Morris says they are undertaking the environmental impact assessment work.

Morris adds they have not put a time frame on when they would present the report.

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Newcrest Papua New Guinea gold mine remains suspended after worker’s death

Hidden Valley

James Regan | Reuters

Gold and silver mining remains suspended at Papua New Guinea’s Hidden Valley mine following the death of a worker on July 18, joint venture partner Newcrest Mining of Australia said on Monday.

“Safety is our number one priority and production at Hidden Valley is suspended until further notice,” spokeswoman Rachel Eaves said in an email to Reuters.

It is the second incident in little over a month where a Newcrest mine in Papua New Guinea has been forced to suspend production.

The company’s larger Lihir gold mine on Lihir Island in the Bismark Sea was shut for 36 hours in June due to a dispute over a compensation package.

The Hidden Valley mine is owned 50-50 by Newcrest and Harmony Gold Mining Ltd of South Africa.

The employee was fatally injured in an incident on a road at the mine site and an investigation was underway, according to an earlier Newcrest statement.

It was not immediately clear what had led to the fatality, according to Eaves.

The Hidden Valley mine has a production target of a quarter of a million ounces of gold and 2.5 million to 3.0 million ounces of silver annually.

Because the incident occurred after the end of the fiscal 2015 year on June 30, analysts were not expecting any impact annual production figures scheduled to be released on July 23.

Employee killed at Newcrest

AAP via SBS

Newscrest Mining has suspended work at its Hidden Valley mine in Papua New Guinea following a worker’s death.

The gold miner said the employee was fatally injured on Saturday afternoon and the company has temporarily suspended work at the mine while an investigation is carried out.

“We express our condolences and support to the employee’s family, friends and colleagues at the Hidden Valley operation, during this difficult time,” the company said in a statement on Monday.

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Harmony weighs up options for Papua New Guinea project

golpu briggs harmony

Allan Seccombe | Business Day Live

HARMONY Gold is assessing how best to extract value from its Golpu copper and gold deposit in Papua New Guinea, which is not recognised in its share price.

CEO Graham Briggs said the company was aware that investors in the metals had different strategic requirements. Over and above dealing with ageing, low-grade, deep-level mines in SA, Harmony’s board is weighing various options around the Golpu deposit it shares with Australia’s Newcrest Mining, Mr Briggs said last week.

Shareholders balked at the initial $5bn cost to mine Golpu, forcing the partners to adopt a cheaper, staged plan at a cost of $2.3bn for the first 27-year phase to extract 3.7-million ounces of gold and 2.2-million tonnes of copper. Harmony would need to find R14bn to fund its half of the project, more than twice its R6bn market capitalisation.

The options around Golpu potentially range from an outright sale to unbundling the asset or separately listing it, with the option of Harmony retaining a stake in Golpu.

There is a remote possibility of Harmony retaining the project and other assets in Papua New Guinea and separating the South African mines.

The question is also whether Harmony will bundle all its Papua New Guinea assets, which include wholly owned exploration tenements, into a single vehicle or keep the Hidden Valley mine and other prospects within Harmony.

Splitting Golpu out of Harmony could “release some of the Golpu project’s inherent value”, JP Morgan’s Allan Cooke said.

While Mr Briggs declined to say what options were under consideration by the board, with copper generating 77% of Golpu’s revenue and gold 23%, the thinking was that Harmony needed to tailor its portfolio to cater for gold-focused shareholders and those who wanted copper exposure.

“My view is we have to look at a different structure and one that can finance Golpu.

“My opinion is if we have that different structure with different shareholders, then we’d be able to attract those investors prepared to invest in Golpu,” Mr Briggs said.

“Personally, I believe the South African assets can be restructured in the right circumstances to satisfy the gold investors, who are generally shorter-term, dividend-focused shareholders,” he said.

Harmony has just completed restructuring its Masimong mine after it reshaped its Kusasalethu mine and it is now busy with a similar process at its Doornkop mine as it grapples with soaring costs in SA.

It has closed a number of exhausted mines.

“It’s about looking at investors, the markets and timings to see how we change our strategy to fit the realities we are seeing,” Mr Briggs said.

The board had asked for information before debating options and going into the finer details of the various plans.

“We have not got into the mechanics of what we are going to do and how to do it yet,” Mr Briggs added.

Harmony shareholders had to realise the financial benefit of any disposal of Golpu or the Papua New Guinea assets as a whole because cash generated from the South African mines had funded those assets instead of paying dividends, said an analyst who declined to be named. Mr Briggs said the definitive feasibility study into the first phase at Golpu would be completed by December, which would give potential investors firm data to value Golpu.

“If you were going to split or separate somehow, you could maybe do it when the next project report is out. If you were to do something, that’s the time you’d do it,” Mr Briggs said.

Timing was critical to any decision, he said and pointed to the turbulent nature of the global commodity market, uncertainty about Chinese demand for resources and investors’ appetite for resource companies.

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The Extractive Industry Transparency Initiative in Papua New Guinea: Just more corporate greenwashing?

eiti logo

ACT NOW!

Papua New Guinea has recently signed up to the international Extractive Industry Transparency Initiative, but is EITI a good thing for the people impacted by the oil gas and mining industries? Or is EITI just another form of corporate green washing?

There are a number of arguments that support the view that EITI allows governments and the mining industry to look good while not delivering any tangible benefits for local populations:

  • EITI endorses and supports the idea that large-scale foreign-owned extractive industries are a good option for non-industrialized countries like Papua New Guinea. But in truth this is the wrong model of development.
  • EITI was established in 2002 but has not been shown to have a positive impact on governance, corruption or poverty in those countries where it has been adopted.
  • EITI ignores the negative social and environmental impacts of mining.
  • EITI focuses on just one part of government financial flows and ignores where the money that governments receive actually ends up.
  • Perversely, EITI may encourage more foreign companies to invest in more mines, oil and gas projects, causing yet more social and environmental problems and increasing the divide between rich and poor.
  • There is no vetting of the companies that are allowed to participate in EITI and many of its supporters have a bad track record on the environment and human rights
  • EITI sucks up civil society time and other resources that could be more usefully spent in other areas.

EITI does, however, offer some positives:

  • Knowing how much individual companies pay to the treasury each year may provide useful information for civil society and communities.
  • EITI meetings provide a forum in-country where civil society can meet with government and industry and raise issues of concern.

But how far do these positives outweigh the negatives?

EITI is itself very circumspect about its possible benefits. On its website it describes its benefits to civil society as being “increasing the amount of information in the public domain about those revenues that governments manage on behalf of citizens, thereby making governments more accountable”. 

Interestingly, EITI does not claim any benefits for the wider public or communities living around the resource industries.

What is EITI?

The Extractive Industry Transparency Initiative is a non for profit organisation registered in Norway and based in Oslo. It is funded by governments and industry.

EITI provides a global voluntary standard it says is designed to promote open and accountable management of natural resource revenues. EITI says it seeks to strengthen government and company systems, inform public debate, and enhance trust.

In each implementing country EITI is supported by a coalition of governments, companies and civil society groups.

EITI is cautious in its claims about the benefits of its standard. It merely says that by encouraging greater transparency “some of the potential negative impacts [of extractive resource industries] can be mitigated”. 

The EITI Standard

The EITI maintains the EITI Standard. Countries that implement the Standard are required to make full disclosure of all taxes and other payments made by oil, gas and mining companies to the government in an annual EITI Report. The oil, gas and mining companies are also required to disclose what they pay to the government.

The report allows citizens to see how much their government is receiving from their country’s oil, gas and mineral resources.

The EITI Standard sets the requirements countries must meet in order to be recognized first as an EITI Candidate and ultimately as an EITI Compliant country.

The Standard is overseen by the international EITI Board, with members from governments, companies and civil society

Currently 29 countries are EITI compliant and 17 are EITI candidates, as shown in this map:

eiti country-map

EITI in PNG

In March 2014 PNG was accepted as an EITI Candidate.

As an EITI Candidate, PNG must start disclosing payments and other data about its oil gas and mining sector, including information on license holders and license allocations, production data and other information.

PNG is required to publish its first EITI Report by 19 March 2016. If it is not published by then PNG will be suspended from EITI.

PNG must meet all of the requirements in the EITI Standard within three years (by March 2017)  to be recognized as EITI Compliant.

Each EITI country is required to establsih a Multi-stakeholder group made up of government, company, and civil society representatives to oversee the EITI implementation.

As PNG has been accepted as a candidate country the PNG MSG is required to publish a report stating the efforts PNG has undertaken to meet the EITI Requirements. The report for 2014 is required to be published by 1 July 2015.

Lucas Alkan in the Treasury Department is the PNG government’s National Coordinator for EITI

History

EITI was developed as a response to the ‘Publish What You Pay’ campaign against extractive industry companies in the 1990’s and early 2000’s. The PWYP campaign was led by Global Witness, Human Rights Watch and Oxfam.

Companies argued that rather than publishing what they paid the campaign should target government who should publish what they received

The idea of EITI was devised by the British government in 2002 (as British Petroleum or BP was one of the big targets of the PWYP campaign)

The Norwegian government was one of the early supporters of EITI, hence the EITI secretariat is based in Oslo.

Funding

The EITI secretariat has an annual budget of $5 million which comes from governments (62%) and industry (37%).

Stakeholders

EITI is a coalition of governments, companies, investors and civil society organisations, who are all represented on the EITI Board.

About 90 Companies are involved in EITI including Barrick, BHP, ExxonMobil, Newcrest, and Rio Tinto.

NGOs involved include Global Witness, Oxfam and Transparency International

Criticisms

The wrong model of development

EITI uncritically endorses and supports the wrong model of development. It is based on the idea that large-scale foreign-owned extractive industries can improve the livelihoods of rural people. This is a model of development that in Papua New Guinea contradicts and undermines the National Goals and Directive Principles in the Constitution.

No impact on governance, corruption or poverty

Transparency International’s annual reports on corruption and a study by EITI itself show that in EITI compliant countries their have not been any appreciable improvements in governance, reduction in corruption or poverty alleviation. EITI compliant countries do not perform any better than their non-compliant peers. Many of the countries that are EITI compliant have long histories of corruption, civil violence and dictatorships and most of them retain low levels of citizen participation in politics, weak accountability systems, and corruption.

Ignores social and environmental impacts

EITI ignores the social, human rights and environmental impacts of resource industries and allows participation by countries and companies with appalling social responsibility records. EITI does not just divert attention away from these key issues it provides governments and companies with a veneer of respectability

EITI ignores where the money ends up

EITI only deals with one part of the money chain, receipts by government. It does not follow how that money is used or where it ends up. EITI does not police how officials eventually make use of payments made by the corporations.  EITI also does not address upstream activities, such as procurement, which involves large sums of money and can be a source of corruption.Therefore EITI takes focus and attention away from fighting corruption and stopping the stealing of public monies.

EITI can encourage more investment by foreign companies

By providing a veneer of respectability EITI can encourage more foreign companies to open mines or new oil and gas projects. As EITI explains, it can provide ‘an improved investment climate by providing a clear signal to investors and international financial institutions that the government is committed to greater transparency’. This can benefit foreign resource companies by reducing their “political and repetitional risks”, reducing “political instability” and help companies promote their investment as a benefit to the country.

No vetting of companies

There are more than 90 companies involved in EITI including some of the worlds biggest mining, oil and gas companies. There is no vetting of the companies that are allowed to participate in EITI and some have very bad human rights and environmental records. Involvement in EITI allows them to poetry themselves in a good light.

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PNG locals shut down Newcrest Mining’s Lihir mine

“They manage landowner issues well, these incidents are infrequent but it is part of life up there.”

Landowners are seeking talks over the benefits package relating to the Lihir mine in Papua New Guinea.

Landowners are seeking talks over the benefits package relating to the Lihir mine in Papua New Guinea.

Peter Ker | Fairfax Media

Newcrest Mining’s fractious relationship with sections of the community in Papua New Guinea is continuing to cause headaches as the Lihir mine suffers another unplanned shutdown at the hands of angry locals.

Lihir, which ranks as Newcrest’s second most important asset, was shut for 36 hours over the long weekend after members of the local community entered the gold mining and processing areas to place ginger plants.

The ginger plants are a symbolic way of demonstrating a dispute and are effectively a call for talks over the benefits package that flows from the the mine to locals.

In its statement to the market, Newcrest said “local commercial interests” were involved in the incident, which the miner believes was illegal.

It is not the first time that members of the Lihir Islands community have interrupted operations at the mine: there was a similar interruption (which also involved the ginger plants) in August 2012.

Newcrest said on Tuesday it had recently agreed with the landowner groups in May for an audit to be conducted into the allocation of benefits from the mine, with the PNG Mineral Resources Authority to lead the audit.

It is believed the weekend’s incident, which saw police called to the mine, may be linked to that audit.

Some PNG businesses have also expressed concerns about being overlooked for lucrative contract work at the Lihir mine.

Like most miners, Newcrest has been reviewing contracts in a search for savings, and some Lihir locals were angry when a shipping contract was awarded to an international company earlier this year.

The PNG Mineral Resources Authority could not be reached on Tuesday.

Despite production of gold at the mine being interrupted by the weekend’s incident, Newcrest said production guidance for the year to June 30 would not be affected.

“The continued predictable and lawful operation of the Lihir gold mine and plant contributes to the long-term sustainable benefit of all stakeholders, including the host community. Newcrest is committed to working with landowners and all levels of government to create that outcome,” the company said.

Lihir has under-performed since being acquired by Newcrest in 2010, but in recent months it has finally shown signs of improvement.

Gold production at Lihir was 11 per cent higher in the March quarter than in the December quarter, while the costs of production were 12 per cent lower over the same period.

Morgans analyst James Wilson said the improvement program put in place by new Newcrest boss Sandeep Biswas was bringing results.

“Newcrest have posted some very strong quarters of late, the March quarter was exceptional at Lihir and has probably been an insulating factor for incidents like this,” he said in regard to the weekend’s incident.

“They manage landowner issues well, these incidents are infrequent but it is part of life up there.”

Newcrest shares closed 23 cents lower at $13.44.

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Police sent to reopen Lihir gold mine after locals use taboo plant to demand talks with Newcrest

PNG custom deemed ‘illegal’ by foreign mining company

Heavily armed police squad deployed on company behalf 

PHOTO: The gorgor is made from the twisted leaves of a ginger plant. (Newcrest)

The gorgor is made from the twisted leaves of a ginger plant. (Newcrest)

Liam Cochrane | ABC News

Heavily armed police have flown to Lihir Island to re-open Papua New Guinea’s largest gold mine after landowners halted operations and demanded talks with Australian company Newcrest Mining Ltd.

The mine shut down on Saturday afternoon, when local landowners placed taboo ginger plants known as gorgors at the mine pit and other sites, which is a traditional signal they want to hold discussions with the company.

The local landowners said their Integrated Benefits Package (IBP), which was due to be reviewed in 2012, was now three years behind schedule.

They also cited breaches of mine development activities, tendering of Lihirian business to “outside interests” and environmental damage as reasons for their discontent.

“We are not asking for something new, our revised agreements are not new, these are agreements Newcrest has not honoured,” Nimamar Local Level Government president Ambrose Silul said.

A heavily armed 17-member police mobile squad was deployed to Lihir, a small island group east of PNG’s New Ireland, and arrived on Sunday to remove the symbolic gorgors.

Newcrest confirmed the gold mine shut down for approximately 36 hours and called the landowner’s use of the gorgors “illegal” under an agreement signed in May.

“The MRA [Mineral Resource Authority] has previously provided notice that the power to disrupt mining operations resides solely under the authority of the MRA and any action outside of that is deemed illegal,” Newcrest said in a statement to the ABC.

“A temporary disruption to operations at Lihir was experienced while a return to an agreed formal process to resolve concerns raised by some of the community and other local stakeholders was discussed.

“Operations will scale back up this evening.”

Miner has failed us: landowners

A landowner representative defended the traditional use of the taboo ginger plants as a call for dispute resolution.

“What we have to be clear about is that the placement of gorgor is the Lihirian peaceful way of saying we have a dispute and we must come to the table to negotiate and resolve any issues relating to this dispute,” Lihir Mining Area Landowners Association chairman James Laketan said.

The Newcrest gold mine was shut down after landowners on Lihir Island used an arrangement of ginger plant leaves to signal they would like to call for dispute resolution. (Flickr: Chronox73)

The Newcrest gold mine was shut down after landowners on Lihir Island used an arrangement of ginger plant leaves to signal they would like to call for dispute resolution. (Flickr: Chronox73)

Landowner groups also singled out Newcrest general manager Craig Jetson as a hindrance to further talks.

“Craig Jetson has failed us. Therefore, we will only negotiate with the developer’s chief executive officer who is based in Canberra, Australia,” Mr Silul said.

The Lihir gold mine is located in an extinct volcanic crater and is believed to be one of the world’s largest gold deposits.

Since production commenced at the mine in 1997, the site has produced more than 9 million ounces of gold.

Newcrest’s website says around 90 per cent of the mine’s 5,000 employees are Papua New Guineans.

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