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Chinese redevelopment of Solomon Islands’ Gold Ridge mine dubbed ‘way over the top’

PHOTO: The Gold Ridge mine has a long and chequered history.

Key points:

  • The deal follows a month after the Solomon Islands switched diplomatic ties from Taiwan to Beijing
  • The Solomon Islands will not own the new infrastructure
  • The former Australian-listed company that owned the mine sold it to local landowners for $100 in 2015

ABC News | 30 October 2019

Chinese companies will build and control power and port facilities, roads, rail and bridges on an island within the Solomon Islands, as part of an $825 million deal to revive an abandoned gold mine, according to new contract details.

The gold project agreement, described by Chinese ambassador Xue Bing as an “early harvest” of the new diplomatic tie-up between Beijing and Honiara, gives Chinese interests an increased foothold in the Pacific, long under the influence of the United States and its allies.

While locals initially expressed fears the Gold Ridge mine deal would saddle the island nation with debt, those attending a weekend ceremony at the mine site were told the Solomons would not pay for the project infrastructure.

Nor will the country own the infrastructure.

A company majority-owned by Hong Kong-listed Wanguo International Mining, which has the project rights, will retain ownership of any project related-infrastructure, according to the project terms presented to attendees.

Wanguo has contracted state-owned China State Railway Group $825 million to complete the works over several phases.

The previous owner, Australian-listed St. Barbara, sold the mine for a nominal $100 to a landowner group in 2015, and that group went on to secure interest from Australian-based Chinese company AXF Resources, and then Wanguo.

Those attending the ceremony at the mine site, located about 30km south of Honiara, were told the large contract would involve a significant infrastructure component beyond the immediate mine site.

“Only China, proceeding from the friendship and wellbeing of the local people, is ready to overcome all obstacles to undertake this project by planning to build roads, bridges mining facilities and a hydropower station,” Mr Xue said, according to the recording.

A separate announcement from China Rail in September also said the contract included port work.

The infrastructure will be built in and around Honiara on the island of Guadalcanal, a strategic Pacific location that saw fierce fighting in World War II.

While the Solomons government, China Rail and the project operators have denied any political involvement in the mining deal, it was presented at the project ceremony as an example of what the new relationship between China and Solomons can deliver.

The agreement was announced in mid-September, coinciding with a decision by the Solomons Government to switch diplomatic ties from Taiwan to Beijing, angering the United States in the process.

“This is not only a new beginning of the Gold Ridge mine, but also a very important early harvest of the friendly cooperation between China and Solomon Islands which established diplomatic relations just 35 days ago,” said Mr Xue, who is the Chinese ambassador to Papua New Guinea.

Solomons landowners and politicians, Chinese officials, and representatives of China Rail and Wanguo were at the ceremony, said a source who attended.

Solomon representatives were repeatedly reassured the Pacific nation would not be subjected to a “debt-trap”, an allegation used against China by the United States.

Wanguo did not immediately respond to questions. The Solomons Government, which did not immediately respond to questions on Wednesday, has previously said it was a private sector deal and was not privy to the commercial arrangements.

Solomons opposition lawmaker Peter Kenilorea said the Gold Ridge agreement was opaque and its terms needed to be better explained.

The size of the contract has perplexed mining analysts, given past private operators have struggled to make the mine profitable.

Independent Australian-based mining analyst Peter Strachan said the agreement was “way over the top” for a relatively low-grade gold project with modest reserves.

“There has to be some back story on this,” said Mr Strachan, who has visited the Guadalcanal mine site.

The troubled Gold Ridge mine last operated in 2014, before severe floods halted production.

At its peak it was the source of 30 per cent of GDP in the Solomons, which is largely reliant on timber exports. Solomons GDP was at $1.4 billion last year, according to World Bank data, making it one of the world’s smallest economies.

The project owners have not released an anticipated date the project will restart.

Walton Naezon, chairman of the Gold Ridge landowner group, said the Gold Ridge deal was a commercial arrangement with no political input.

He said the project’s two other equity owners, Wanguo and AXF Resources, were raising $275 million to pay China Rail to bring the mine back into production.

“The balance is the second phase to be approved, which includes things like underground work,” Mr Naezon said, referring to the remainder of the $825 million contract.

“China Rail will bring their own machines. They will employ 70 per cent local labour and the rest will be their own staff.”

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Troubled Gold Mine Sold to Local Landowner Company for A$100 Relaunched in Solomon Islands

Photo: Flickr/Jenny Scott

Sputnik News | 27 October 2019

The troubled Gold Ridge mine in the Solomon Islands changed ownership multiple times over the years and was shut down by its last owner in 2015 after severe flash flooding.

The Gold Ridge goldmine in the Solomon Islands was officially relaunched Sunday in Central Guadalcanal, reports Radio New Zealand.

The mine which is currently the property of a local landowning company, Gold Ridge Community Investment Limited, is less than an hour’s drive from Honiara across the Guadalcanal Plains and has stood dormant for the past three years.

It is now being redeveloped by the Chinese miner Wanguo International working in partnership with Chinese owned Australian developer AXF Group and local landowners in Central Guadalcanal.

Speaking to RNZ Pacific earlier in the week, a spokesperson for Gold Ridge, Allen Wang, applauded the new contract for the reconstruction of the mine by the China Railway International Group, emphasizing he believed China Railway “had the mining experience, construction expertise and Pacific experience to make a great contribution to the development of a world class mine in Solomon Islands”.

The contract signed by Honiara and China Railways involves two major phases.

The first phase includes an exterior mountain-stripping project followed by the installation of interior mining equipment and facilities.
The second phase includes the construction of roads, bridges, and a nearby reservoir along with dock facilities and a hydropower station.

The mine on central Guadalcanal, south-east of the capital Honiara, began operation in 1998, and at the height of its production in 2012 accounted for 20 percent of the country’s entire gross domestic product.

However, a succession of foreign owners and intermittent periods of closure due to civil unrest and environmental problems left a troubled legacy.

After Cyclone Ita and torrential rain damaged infrastructure and forced the mine to shut down in 2014, its Australian owner, Santa Barbara, sold the venture and its legal liability a year later to Gold Ridge Community Investment Ltd, a local landowner company for AU$100.

Shortly after St Barbara sold the mine, the Solomon Islands Government declared it a disaster area when a tropical cyclone filled the dam to capacity.

On 12 September 2019, the mine signed a deal with China Railway Group Limited of China worth US$825 million to build and lease a railway system and mining service station.

China Railway International announced the deal on its website’s notice board on the date it was signed, with parent company China Railway Group announcing it on 16 September, the day the Solomon Islands and Taiwan officially broke ties.

The contract is to last until March 2034.

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How do miners dispose of their waste in the sea?

MCC’s Basamuk Refinery in Madang pumps waste from the Ramu mine directly into the ocean

Melanie Burton | Reuters | October 11, 2019

Sea disposal of mining waste could spread as Indonesia weighs adopting the technique for new nickel projects, as Papua New Guinea is doing for a gold mine proposed by Australia’s Newcrest Mining.

The management of mining waste has drawn attention since two dam disasters in Brazil, and after red mud spilled into Papua New Guinea’s Basamuk Bay from Ramu Nickel’s operations in August.

An expert in chemical contamination has called test results from the Ramu Nickel spill “alarming,” media said this week. That spill resulted from an operational failure, however, rather than an issue with tailings management.

Proponents say deep sea tailings placement, which pipes unwanted pulverized rock into the sea, is cheaper and less harmful, especially on tropical islands where earthquakes or heavy rain limit storage on land, near deep sea trenches.

Critics say the impact of such marine disposal is poorly understood.

Fewer than 20 of the world’s 2,500 mines use the method to dispose of tailings waste, comprising rock, microscopic unwanted metals and traces of processing agents, such as cyanide.

Here are answers to some common questions, drawn from two research papers by Australia’s science bureau, the CSIRO.

WHAT IS DEEP SEA TAILINGS PLACEMENT?

Mining waste goes down a pipe 100 m (328 ft) or more offshore designed to sink rapidly to even greater depths, such as those off the continental shelf. The waste settles on parts of the ocean floor believed to be home to few creatures.

That keeps the waste out of the ocean’s most productive surface layer, where sunlight drives photosynthesis, and sealife is most abundant.

After the mine has closed, advocates say the deposit area will gradually be recolonised by the marine life and bacteria that were there before, as they now move back from surrounding areas.

WHEN WAS IT FIRST USED?

The first commercial use of deep sea tailings placement was at the Island Copper mine on Canada’s Vancouver Island in 1971 to 1996. Industry regarded that as a success, though it was also found to have affected the lake’s biodiversity. Some other early mines, such as Greenland’s Black Angel lead and zinc mine, however, contaminated surrounding water bodies.

WHERE IS DSTP USED NOW?

  • The Lihir gold mine in PNG run by Newcrest Mining. The Melbourne-based miner also proposed DSTP for its Wafi Golpu project with South Africa’s Harmony Gold.
  • The Simberi gold mine operated by Australian miner St. Barbara in PNG’s New Ireland province.
  • The Ramu nickel mine and plant run by Metallurgical Corporation of China in PNG’s Madang Province.
  • Batu Hijau, Indonesia’s second largest copper mine, run by PT Amman Mineral Nusa Tenggara.
  • Australia’s Kingston Resources is considering reopening PNG’s Misima gold mine and using DSTP.

WHAT ARE THE ISSUES?

ECOLOGICAL DIVERSITY: A quarter of the world’s coral reefs faced rising exposure to sediments and nutrients, boosting stress from climate change and ocean acidification, Australia’s science agency said in 2016. Greater sediment could smother coral or choke off sunlight or oxygen, it said.

SUSPENSION: Fine dust or metal particles remain suspended in the ocean instead of settling on the sea floor. They can “shear off” in plumes, widely dispersed by ocean currents, and travel between layers of varying salinity or temperature.

The impact on marine life is not fully understood, but coral near the Lihir tailings disposal site suffered a “substantial impact,” according to the paper.

Plankton could be trapped in suspended solids and fine particles could clog the gills of fish, it added.

MIGRATION: Marine animals could carry trace elements of mine waste into the food supply chain after ingesting them and then moving to shallow waters from the deep ocean.

DEEP SEA: Wider use of DTSP could affect deepwater canyons and abyssal or underwater plains that are high in biodiversity, according to the research.

RECOLONISATION: Ocean warming and acidification could hamper efforts to recolonise a DTSP area, it added. (Reporting by Melanie Burton; Editing by Darren Schuettler)

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Australian miners in firing line of PNG law shake-up

The streets of Sydney are paved with Papua New Guinea’s gold

Jewel Topsfield | Sydney Morning Herald | 17 July 2018

Major Australian mining companies face the prospect of higher royalties, tough restrictions on fly-in fly-out workers and the potential nationalisation of assets under reforms under consideration by the cash-strapped Papua New Guinea government.

The proposed law changes have sparked warnings from the country’s peak mining body that they would pose “significant deterrents” to investment in future projects and “threaten the existing operations of current mines”.

Several Australian Securities Exchange listed companies including Newcrest, Highlands Pacific and St Barbara Limited operate mines in Papua New Guinea, which has significant resources including gas, gold, copper, cobalt and nickel.

Mineral exploration in Papua New Guinea

The PNG Chamber of Mines and Petroleum says the proposed changes to the Mining Act could clamp down on international fly-in fly-out workers, impose a right for the state to compulsorily acquire mining projects (on commercial terms) after 24 years and result in an increase in royalties.

It says some of the proposed changes – which have been under discussion for years – would have “severe negative impacts in the immediate and long term on both existing operations and proposed projects”.

But the Resource Owners Federation of Papua New Guinea claims existing laws are “primitive, unjust and self-harming”, and mining companies continue to reap benefits while keeping the landowners and citizens who own the resources poor.

PNG Deputy Prime Minister Charles Abel told Fairfax Media the government was concerned about a number of factors including increasing the share of benefits to landowners.

The Papua New Guinea resource industry is responsible for just 20,000 jobs in nation of over 8 million people.

“Any proposed amendment must address the underlying concerns and keep PNG competitive as an investment destination,” he said.

New copper and gold projects inlcuding the Newcrest-led Wafi-Golpu mine and PanAust’s Frieda River mine are currently awaiting special mining leases from the PNG government.

At an update last month Mr Abel said the PNG government was bringing on Wafi-Golpu, the expansion of a ExxonMobil-operated PNG liquefied natural gas plant and Papua LNG “under an improved fiscal template”.

The Wafi-Golpu project, a joint venture between Newcrest and Harmony Gold, is a key part of Newcrest’s future and is considered the company’s top growth asset.

Newcrest’s Wafi-Golpu joint venture mine in PNG.

Australian company PanAust holds an 80 per cent interest in the Frieda River copper-gold project, which has an estimated initial mine life of 18 years.

PNG Chamber of Mines and Petroleum executive director Albert Mellam said some of the proposed changes had undermined investor confidence in PNG.

“We are concerned that some of the draft amendments are internationally uncompetitive, are a serious deterrent to investment in future mining projects in PNG and will threaten the existing operations of current mines in the country,” he said.

Dr Mellam said the transitional arrangements were inadequate to protect existing operations and could affect permit applications that already been submitted. He also said businesses would have to wear increased royalties, fees and levies and “unreasonable penalties”.

He said the passing of legislation in February – which removed industry representation on the Mineral Resources Authority Board and doubled the production levy rate from 0.25 per cent to 0.5 per cent – had already created a “great deal of uncertainty in the minerals sector and for international investors watching PNG”.

“The industry has already observed a gradual decline of investment into mineral exploration over the past two years.”

Mr Abel, who is both the Treasurer and Deputy Prime Minister of PNG, told Fairfax Media the current system had yielded good returns to government from mining projects in the past but a number of circumstances had combined to greatly reduce these flows as a share of government revenue.

These included projects approaching maturation, tax concessions, low prices, PNG LNG and Lihir, the gold mine owned by Newcrest, accessing accelerated depreciation provisions and greater use of the tax credit scheme.

“The state is not necessarily seeking to increase its take but wants earlier returns and smoother flows at lower cost,” Mr Abel said.

The gold processing plant on Lihir Island in PNG. Photo: Reuters

“This may necessitate a tax regime that is more production based rather than profit, has longer depreciation periods, has an element of free carry equity and simpler, more transparent structural arrangements and doing away with tax concessions.”

Mr Abel said PMG also wanted to minimise international fly-in fly-out operations to retain more benefits in Papua New Guinea.

The proposal to reduce maximum mining licenses from 40 to 25 years was “still under consideration”.

Mr Abel said the government was determined to deliver Wafi-Golpu, the PNG LNG expansion and Papua LNG to early works and final investment decision by 2019.

“These and other imminent projects should be based on the current legal framework with negotiated terms to meet some of the requirements I mentioned.”

The Resource Owners Federation of Papua New Guinea said the Mining Act should be reviewed in its entirety, so the ownership of minerals was retained by customary landowners.

“Minerals can still be mined only after development agreements are reached between the landowners and mining companies,” it said in a statement.

“All parties then benefit from a project, in contrast to Papua New Guinea in the past and today, where the landowners are the ultimate losers.”

According to the 2018 PNG economic survey by the Australian National University and University of PNG, the country is experiencing an “urgent economic crisis” and a shortage of foreign exchange is worsening.

The economy is dependent on the resource sector, which makes up 30 per cent of GDP, but much of it is foreign owned and a large share of the benefits flow offshore.

“Since 2015, resources revenue (corporate taxes and dividends from mining and petroleum) have been at their lowest level since 1992,” the economic survey says.

It says accelerated depreciation and tax holidays meant new projects paid no or virtually no resource revenue but it was surprising that even older projects were paying very little revenue.

“On the one hand there are genuine concerns in PNG that the country and landowners haven’t been getting a good deal from resource projects and change is needed,” said Professor Stephen Howes, the director of the Development Policy Centre at ANU.

“On the other hand the economy is in a very precarious state and the government is desperately looking for stimulus from new resource projects. That’s the tension … I think the government is in a difficult position.”

Professor Howes said he did not believe big new projects would go ahead until the uncertainty was resolved.

“They want clarity on these issues because they are long-term investments and these issues are seen as very important.”

Austmine, the leading industry body for the Australian Mining Equipment, Technology and Services sector, said current macroeconomic conditions and mining regulations in PNG had proven to be “considerable roadblocks to investment, creating uncertainty and stifling exploration”.

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St Barbara resolves Simberi dispute

Simberi Gold Mine

Australian Mining | March 15, 2018

St Barbara has resumed full operations at the Simberi gold mine in Papua New Guinea following “illegal” industrial action at the site.

The Australian gold miner halted production at the site last week for safety reasons as management attempted to resolve the dispute.

In an ASX announcement, St Barbara reported that a contingent of the mine’s workforce initiated the industrial action. Around 40 per cent of the mine’s workforce remained at work during the stoppage, it added.

Mediation, led by representatives from the PNG Department of Labour and Industrial Relations, has since resolved the stoppage, with full operations resuming late yesterday.

“The stoppage was primarily due to misunderstandings regarding leave provisions and other employment conditions, which have now been clarified,” according to St Barbara.

Simberi has produced 93,000oz of gold this financial year. St Barbara expects the mine will achieve full-year guidance of between 115,000–125,000oz of gold despite the interruption.

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Work stops at Simberi


Esmarie Swanepoel| Mining Weekly | 12 March 2018

Gold miner St Barbara has suspended work at its Simberi operations, in Papua New Guinea, following illegal work stoppages by a contingent of the workforce.

The miner told shareholders on Monday that production was halted on March 7, for safety reasons, while management attempted to resolve the stoppage. Some 40% of the workforce remained at work during the illegal industrial action.

The company noted that despite efforts to resolve the stoppage, no progress had been made towards a resolution by Sunday. To breach the impasse, site management informed the workforce that the work stoppage was not in accordance with Papua New Guinea law, and that any employee who did not present for work on Monday, would have their employment terminated.

However, St Barbara on Monday deferred the termination of employees who did not present for work, after some progress was made in negotiations, and in anticipation of the arrival of representatives from the Department of Labour and Industrial Relations.

A remediation will be led by the department to address the remaining concerns behind the stoppages.

The miner expected process plant operations to restart on March 13, on a day-shift-only roster, while limited mining operations will resume with the national workforce and some local islanders and existing contractors.

Despite the stoppages, the Simberi operation is still expected to achieve its full-year production guidance of between 115 000 oz and 125 000 oz of gold

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Landowners to rescue Solomon Islands mine – and perhaps more

The Gold Ridge gold mine in Solomon Islands has had a chequered history.

Catherine Wilson | The Interpreter | 21 December 2017

The dusty streets of Honiara are bustling. Once ravaged by militia fighting, 14 years of peacekeeping by the Regional Assistance Mission to Solomon Islands now sees men, women and children at markets, schools and shops, confident and free.

But the future of the vast archipelago of rainforest-covered islands to Australia’s northeast is still work in progress. Long term peace and stability after the ‘Tensions’ (1998-2003) depends on addressing the causes and grievances of the conflict, and making headway on equitable development for urban and rural islanders. According to the Pacific Islands Forum, hardship and unemployment remain high in the country and ‘strong resource-led growth is failing to trickle down to the disadvantaged’. 

Landowner grievances, compromised governance and acrimonious competition for land and resources were key triggers of the violence that erupted in Guadalcanal Province in the late 1990s. So tackling land disputes, corruption and management of the country’s natural resource wealth is at the core of ensuring sustainable peace.

Western province, Solomon Islands (Photo: Catherine Wilson)

Natural resource management will be in the spotlight after the government in Honiara recently identified the exploitation of mineral resources – still relatively under-developed in Solomon Islands – as one avenue to boosting post-conflict economic recovery. At the same time, plans are underway to reopen the Gold Ridge mine by the end of 2018.

The mine, a drive of less than an hour from Honiara across the flat, sun-baked Guadalcanal Plains, through farming villages and miles of oil palm plantations, has stood dormant for the past three years. The extraction of gold began here in 1998, but a succession of foreign owners and intermittent periods of closure due to civil unrest and environmental problems has left a troubled legacy.

In nearby villages there are diverse views on the mine’s future, but predominantly people want to see greater local ownership.

‘It [the mine] may open, but it needs to involve more people than before,’ said Stanley Holmes Vutiande. He lives in Navola village, just two kilometres from the mine. ‘More people need to raise their voices and their concerns be taken care of … we need to have the young people and the women come in to participate in deciding the future because the future belongs to them.’

The next phase of the mine’s life offers a window of potential. After Cyclone Ita and torrential rain damaged infrastructure and forced the mine to shutdown in 2014, its Australian owner, Santa Barbara, sold the venture and its legal liability a year later to Gold Ridge Community Investment Ltd, a local landowner company for AU$100.

Walton Naezon, chairman of the what is now a landowner-led joint venture, Gold Ridge Mining Ltd, is adamant that a more inclusive and visionary corporate structure is in the making. The aim is to embrace corporate responsibility through increased operational and environmental transparency. This will allow local participation in decisions and better relations and communication with stakeholders, especially communities.

Local landowners hold a 30% stake in the company, Naezon said, and representatives of communities surrounding the mine, where up to 5,000 people live, conduct environmental monitoring. Water samples are taken in nearby rivers and community monitors oversee the results. The representatives have participated in key company decisions, including the agreement outlining the benefits communities will receive from the mine. They have also joined in the appointment of an independent environmental consultant. Local students are invited to visit the tailings dam to learn about the water treatment process and witness the release of treated water.

Yet the story of the dramatic decline of the nation’s logging industry, which at one time accounted for 60% of export earnings, stands as a warning of the obstacles ahead. Half a century of rampant timber extraction saw in excess of four times the sustainable rate of 250,000 cubic metres per year. Transparency Solomon Islands has claimed it ‘regularly hears stories of politicians using their power to protect loggers, influencing police and giving tax exemptions to foreign businesses, in return loggers fund politicians’.

Logging on Kolombangara island, Solomons. (Photo: Catherine Wilson)

The reopening of the Gold Ridge mine is important for economic growth, said a spokesperson for the Ministry of Mines, Energy and Rural Electrification. A significant drop in national revenue followed the closure in 2014 and the start of two bauxite mines in West Rennell province the following year.

But the risks remain. Graham Baines pointed out in a paper published by the Australian National University that ‘should mining be forced while governance of the mineral sector remains weak and uncertain, corruption is rife and villagers are ill-informed and uncertain, the rural population could become a potent source of dissent and obstruction’. This was especially a danger in Melanesia, Baines said, where violence and mining seem to be partners.

Yet conflict is not the inevitable consequences of natural resource development in fragile settings. A recent report by Chatham House in London claims the outcomes depend on behaviour – by politicians, bureaucrats, companies and community representatives.

The Solomon Islands government has recently launched the National Minerals Policy (2017-2021), providing a legal framework for improving regulatory authority, industry scrutiny and revenue accountability. It also requires landowners and communities are party to consultations and can access legal advice. Awareness training is especially critical for those landowners who lack substantial understanding of the mining industry, their legal rights or the consequences of their decisions.

It is still early days. The government, working with the World Bank, is only beginning to implement the new policy. But the Gold Ridge mine will be a case to watch as not only Solomon Islands, but the Pacific islands region, grapples with how to take natural resource extraction out of the hands of elites and avoid the trap of conflict.

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