Tag Archives: Xstrata

Time PNG govt exercised better control over its own resources

A Britten Norman Islander, the first plane to land at Frieda River in 1970. Kiap John Pasquarelli had discovered gold and copper in 1963. Now, 55 years later, the mine is still undeveloped and the object of great controversy

Gabriel Ramoi | PNG Attitude | 12 June 2018

Resources firm Pan Aust (wholly owned by the Chinese state company, Guangdong Rising Assets Management, GRAM), has lost its way with the Frieda River copper-gold project in Papua New Guinea’s Sandaun Province.

It is now time for the PNG government to exercise leadership and rein in control over the Frieda asset if the PNG is to sustain its free education and health policies and lift the rest of the country out of poverty, disease and ignorance.

The view from Frieda is now very different compared with the corporate carnage of 2013 following Glencore’s hostile takeover of Xstrata Mining. In that epic battle for world copper supremacy, Mike Davis’s Xstrata lost to Ivan Glasenberg’s Glencore and with it went a chunk of PNG’s national asset, the K260 billion Frieda mine.

Glasenberg has gone on to become the king of copper and head of the number one mining house in the world.

But then, for a deposit of just K80 million, little known Australian miner Pan Aust Ltd moved in and acquired Frieda from Glencore while PNG government advisers and ministers slept on the job despite warnings from industry that the government should exercise control and reclaim ownership over its strategic asset.

Pan Aust went on to the sell out to GRAM in 2015 for a reported K1.2 billion although officially the deal was closed at K450 million.

GRAM is owned by the municipality of the city of Guangzhau in southern China, although the deal maker in this transaction was a leading Australian Chinese billionaire Dr Chau Chak Wing, the subject of a current controversy because of allegations that he is an agent of the Chinese Communist Party.

Additionally, the influential South China Morning Post reported in September last year that the chairman of GRAM, Li Jinming, as well as the CEO and chief financial officer had been arrested and are facing prosecution in China for failing to account for a number of acquisitions made by GRAM in Australia, including Pan Aust, leading to a loss by GRAM of more than K3.2 billion.

None of these corporate maneuverings went unnoticed by the government of China and eventually Glencore was forced to sell a number of its copper assets to China in order to keep selling its copper ore to the communist country.

I suspect the sale of the Frieda copper mine may have been part of an arrangement between Glencore and the government of China for a number of its assets to be sold to Chinese-controlled companies.

But the question that now needs to be asked in PNG following the arrest of the GRAM directors is what can the PNG government do with Frieda?

Last week, the PNG Mineral Resources Authority reported that Pan Aust had advised it of the withdrawal of an application for the mine development license over Frieda that was filed in 2016.

I suspect the real reason for this is that Pan Aust does not have the required capital to follow through with the development of Frieda Mine since the arrest of the GRAM executives in China and the freeze on GRAM’s activities pending finalisation of court proceedings in China.

Pan Aust and its junior partner Highlands Pacific are already in arbitration over the issue of the costs relating to each partners contribution to the feasibility study.

In the wake of this total mess, an opportunity exists for the PNG government to open dialogue directly with the government of China to revisit the Frieda project.

Already two leading Chinese state companies – China Energy Engineering Ltd and China Railway Yunnan Construction & Development Ltd – have expressed interest in developing the infrastructure associated with the mine.

The PNG government and the provincial governments of West and East Sepik – the ministers of the two provinces in particular – should take the lead in opening dialogue with China on the Frieda project.

How the Frieda project will be developed is part of the unfolding resource war being waged worldwide between private capital (represented by figures such as Glasenberg, Donald Trump and Malcolm Turnbull) and powerful state actors such as the gvernment of China and other savvy emerging states such as Russia and Indonesia.

The leading US-based mining journal Behre Dolbear reported last week that the Republic of Congo, Ghana, Tanzania, Zambia and Mauritania have recently enacted new legislation apportioning greater revenues from mining in favour of the state to the rejection of Barrick Gold in Tanzania and Glencore in Congo.

Over the last six months we have also seen the rise of resource nationalism in Indonesia with a direct challenge to BHP Billiton and Freeport Copper to divest up to 51% of their interest in the Grasberg mine to the Indonesian state.

At the time of writing, BHP has agreed to sell its 40% stake to the state and current negotiations continue on the quantum of compensation for environmental pollution by Freeport.

While there is a much kneejerk reaction by our neighbours about Chinese checkbook diplomacy in the region, it must be remembered that China is Australia’s number one trading partner.

Despite just 70 years ago China being rolled over by Japan after a long period of being pushed around by colonial powers, it has emerged in recent times as a super power extending its hand of friendship to countries around the world as it builds a new world order with itself at the centre.

“Developing countries where 90% of the world lives are at a crossroad,” says the leading black African woman of our generation, Zambian economist, lawyer and banker Dambisa Moyo. “They are facing a choice between the United States model of democracy and private capitalism or the Chinese model of state capitalism and no democracy.”

This may be too unequivocal as many third world countries including PNG are now better poised to consider bartering our copper, gold and other mineral wealth for infrastructures such as roads, ports, railways, universities and hospitals rather than simply allowing private capital through direct foreign investment.

Our experience over 40 years has been dismal as highlighted by reports such as that by Jubilee Australia. As PNG struggles to build its next generation of mines, the young lawyers and technocrats advising our leaders must take it upon themselves not to repeat the mistakes of the past but to look at recent deals between China and a number of counties in Africa and negotiate a new mining development contract for PNG that we all can be proud of.


Filed under Mine construction, Papua New Guinea

Hearing in London High Court in claim by Peruvians against mining firm

Peruvian community take one of the world’s leading mining companies to the High Court in London claiming it is responsible for the killing and injuring of protesters near a mine in Peru in 2012 


Leigh Day | 24 February 2016

Members of a local community in Peru are taking one of the world’s leading mining companies to the High Court in London claiming it is responsible for the killing, injury and unlawful detention of protestors demonstrating near the Tintaya mine in the Espinar Province of Peru during a disturbance there in May 2012.

At the time the mine was owned by Xstrata Tintaya S.A. (renamed Companía Minera Antapaccay) a subsidiary of the London-based Xstrata Limited, which became part of Glencore Xstrata plc in 2013.

Xstrata denies responsibility, saying in a statement at the time that it “deeply regretted the violent events that resulted in the loss of human lives”, and is robustly defending the legal action. In its Defence it states that whilst it paid a large fee to the Peruvian National Police (‘PNP’) and gave accommodation, food and drink to some of the 1,500 officers who were policing the protests, it nevertheless bears no responsibility for the actions of the PNP.

A preliminary hearing will take place on 25 February. The three-week trial, due to take place in June 2016, will hear claims that on 28 May 2012 following days of protest the PNP shot at protestors, killing and injuring many of them as they legally demonstrated near the mine. The Claimants say that the PNP were operating under the instruction and control of the mine company’s management, a claim denied by the company, Those injured, and the families of those killed, claim the police were paid almost half a million dollars by the company to protect the mine.

Many protestors, who were opposing the environmental impacts and social effects of the mine, claim they were also assaulted, abused and unlawfully detained inside the mine compound. The company denies that any violence took place within the compound itself.

The Tintaya mine was an open pit copper mining and processing operation located in the Yauri district of Espinar Province, Cusco region, Southern Peru.  It has recently been decommissioned and production has moved to the Antapaccay mine, which is located a few miles away.

Those injured, killed or imprisoned by the police include human rights activists, students, mine workers and farmers from the rural population living in Espinar Province.

Three demonstrators were killed. The injured and relatives of those killed are represented by Leigh Day.

Clinicians from the US-based organisation ‘Physicians for Human Rights’ have assessed a number of the claimants and found that they sustained serious life-changing physical and psychiatric injuries and have significant ongoing care needs.

One of the claimants, Mr Yohel Colqque, was hospitalised for 16 months after being shot in the head. He is now unable to walk and is confined to a wheelchair.

He was a student at the time of the protests and was shot while filming a woman being abused by a police officer on his mobile telephone. Yohel is now unable to continue his studies, work, or live independently due to the severity of his injuries.

According to Physicians for Human Rights, the injured man’s family do not have the means to support him. He urgently requires rehabilitation and equipment, including a wheelchair, as well as access to medication for the epilepsy that he has developed since he was shot and for the pain that he experiences on a daily basis.

Xstrata says it conforms to international guidelines on the risk of human rights abuses such as the Voluntary Principles on Security and Human Rights, and is a signatory to the UN Global Compact.

According to the Voluntary Principles: “The primary role of public security should be to maintain the rule of law, including safeguarding human rights and deterring acts that threaten Company personnel and facilities. The type and number of public security forces deployed should be competent, appropriate and proportional to the threat.”

Gene Matthews a partner within the International and Group Claims Team at Leigh Day, who is representing the Peruvians, said:

“The population of Espinar had longstanding concerns about the environmental impact of the Tintaya mine.

“This company, whose headquarters are in the UK, must take full responsibility not only for the actions of its staff and private security forces but also for the direction and control the Claimants allege it exerted over the Peruvian National Police.

“Multinational companies must be held to account, and do more than pay lip service to international human rights principles and guidelines. Lawful protest should never result in deaths and serious injury”.

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The race to avert disaster at the NT’s McArthur River Mine



Jane Bardon | ABC | 12.02.2016

When a giant toxic waste dump spontaneously ignited at one of the world’s largest zinc mines, serious questions were asked about how it could have happened. Jane Bardon investigates how regulators allowed a mine to operate with no known solutions to its massive waste problem.

In the Northern Territory’s Gulf country, Indigenous residents fear they’re on the cusp of an environmental disaster.

They’re calling for the McArthur River Mine, the world’s largest bulk zinc-lead-silver concentrate exporter, owned by the Anglo-Swiss company Glencore, to be closed because its waste rock dump and tailings dam are leaching acid, metals and salts into the McArthur River system.

But Glencore says its operation hasn’t contaminated fish in rivers outside its mine lease. It’s hoping to find solutions to the challenges it faces managing reactive waste rock on its site so it can get approval under a federal and Northern Territory government environmental impact statement (EIS) to keep on mining.

Approved as an underground mine in 1995, the mine was allowed to go open cut in 2006. In an move that outraged the area’s four Indigenous clans, the miner Xstrata was allowed to divert five kilometres of the McArthur River to get to the ore body underneath, and plough through the Rainbow Serpent dreaming site.

That move still hurts some of the clans’ leaders, including Garawa elder and well-known Indigenous painter Jack Green.

‘The hole was hurting me a lot. It’s part of that old rainbow. A lot of old people that were fighting for it; they’re all gone now,’ he says.

‘If they were still here today I think they would be still here with me arguing about that hole. It looks like I am only one person standing up on behalf of myself and my kids and my missus.’



In 2013 the territory government approved another expansion of the mine, to double its size, increase its production rate, produce 500 million tonnes more waste rock, and extend the mine life to 2038.

But six months later, by the end of 2013, the mine’s waste dump spontaneously started combusting. The fire sent a plume of toxic iron sulphide smoke over the pristine coastal floodplains and savannah of the Gulf Country.

Residents, including painter and Garawa traditional owner Nancy McDinny, were horrified.

‘It was really smoking. We saw smoke all around it,’ she says. ‘It made people really scared. We thought it was turning into a volcano or something, getting burst and going down to the river again.’

Pyrite iron sulphide stacked in the dump had heated up in oven-like conditions and ignited.

Glencore had misclassified its waste rock during the EIS as 12 per cent reactive potentially acid-forming rock, and the rest non-acid-forming.

When it received the results of new geotechnical studies in August 2013 it realised it actually had 90 per cent reactive rock—made up of several categories that were potentially acidic, alkaline or metals leaching.

The company had dismissed warnings from the Northern Territory Environment Centre during the expansion EIS process that there was potential for misclassification.

In its reply to the Environment Centre’s objections, the company said in its EIS Supplement: ‘ECNT’s interpretation of the basis for conducting further geochemical work on the non acid forming material is incorrect. Significant information and understanding on the geochemical properties and behaviour of the non acid forming is held.’

Former campaigner Lauren Mellor says the Environment Centre recognised problems before the expansion went ahead.

‘Our submission to the phase 3 expansion for MRM pointed out the fact that no classification for the waste rock had been done adequately to determine the sulphur content, the pyritic nature of the rock material that was on site and what we thought that might pose further down the track,’ she says.

There were also delays in the company informing the NT government it needed to deal with majority reactive rock.

The Territory Mines Department complained in a briefing paper to the chief minister, Adam Giles, that the information was buried in a mine management plan lodged in November 2013, three months after the discovery. It did not call the company in to find out what was going on until February 2014.

The Mines Department also says that although the combustion started in 2013, it was not notified until 2014.

‘The department was advised of a change in the waste rock classification in February 2014 and was alerted that on site practices were not adequately controlling combustion by a complaint from the public about smoke emanating from the wasted rock dump early in the dry season of 2014,’ the department said in a statement.

Glencore’s McArthur River mining manager Sam Strohmayr says there was no attempt by the company to hide the information.

‘That’s not the case at all,’ he says.

‘It’s very clear in the mining management plan about the changes in the classification and we’d already started to put in place changes on the actual mine site at the same time. It’s very clear in the MMP about the changes in the classification.’

The Mines Department’s chief executive, Ron Kelly, says the department has historically dealt with issues that come up on mine sites through the annual and biannual mine management plan process, and that has led to delays in tackling issues at mines.

But he says that is changing, ‘so that when a new technology, or when a new issue is uncovered, that we can move quickly to address those issues’.

‘That is something that the independent monitor has said we need, to be more reactive and ensure that we don’t allow a problem to occur, and then wait a year until a new mine management plan is put in place to address an issue. That’s how we are working into the future,’ Kelly says.

The dump problems were referred to the Environment Protection Authority, and its chairman Bill Freeland decided that the company must submit a new EIS to explain how it was going to deal with the reactive waste rock.

‘They haven’t got there yet but they have done an immense amount of work,’ Freeland says.

‘I think we have to give them a bit of credit, that after this long, long period of probably negligence, what’s happening now is they are actually actively doing things and seem to be looking for answers.’

The federal government has also realised it needs to be involved. It will assess the plan under its EPBC Act, because that act is responsible for making sure threatened species, including the freshwater sawfish, are protected from mine impacts.

Glencore plans to submit its EIS by the end of this year, two and a half years since it was called for.

In the interim, Borroloola residents including Nancy McDinny have been increasingly concerned that the dump’s reactions may have contaminated fish in the McArthur River and its tributaries.

When iron sulphide gets wet, it turns into corrosive sulphuric acid, and other reactive rocks in the dump can leach salts and metals if wet.

‘Fish, sea turtle, dugong that we eat along the sea, shells, we’re too frightened to eat all of our bush tucker now, we grew up eating that stuff,’ she says.

By May 2013 Glencore had doused the dump fire by uncovering the reactive rock and cooling it down, and it has attempted to keep it dry by covering the dump with a layer of clay. It’s also pumping seepage away from the dump into dams.

But the residents’ concerns have not been allayed, because for four years now, since 2012, testing of fish in the Barney Creek on the mine site, by the mine’s consultant, and by the Territory Department of Primary Industries, has found that small species, including rainbow fish and bony bream, have been contaminated with lead above maximum-permitted concentrations, which denote safe eating levels.

Glencore and the government-appointed independent monitor, David Browne from Erias Group, point out there are several possible sources for the Barney Creek fish contamination, including dust off haul trucks on the Barney Creek bridge, dust from the processing plant and seepage from both the waste rock dump and tailings dam.

The company says it’s addressing these problems by catching more dust and better managing seepage from the dump and tailings dams.

But in 2014 and 2015 the fish tests picked up elevated lead, zinc and mercury in fish people catch off the mine site.

Glencore has continued to deny that it has contaminated fish off its site. It has pointed to the fact that many rivers in the region are naturally heavily mineralised. And it says analysis of the isotopes of the lead in the fish caught off the mine site show that they contain non-mine derived lead.

Sam Strohmayr says the isotopes act like a kind of signature for the metals. ‘Each ore body or source of lead has an isotope, or a signature if you like, and you use that to determine where the lead is coming from. So that is the basis of our understanding so far,’ he says.

But the Territory Health Department’s Steven Skov, who works in the Centre for Communicable Diseases, says the science isn’t conclusive.

‘I couldn’t say that what we were seeing was because of the mine and I couldn’t say that it wasn’t because of the mine either,’ he says.

‘Unfortunately, there doesn’t seem to be any data or testing of fish from that area from before the mine was put in place, either when it was an underground mine or when it moved to open cut. I haven’t been able to find anything; nobody’s been able to tell me about anything. So there’s no before and after stuff to make an comparison to.’

He wants signs to be put up warning people about the risks of eating fish, particularly from Surprise or Barney Creeks, or the mine’s Bing Bong port, because he feels the current advice he’s giving to Borroloola people, to just eat a bit of fish two to three times a week, needs to be made clearer.

He is also pushing the NT government to make sure there’s a better fish testing program put in place.

Ron Kelly from the Mines Department also doesn’t believe the isotopes argument is conclusive.

‘There’s no evidence of any minerals or contaminants leaving the mine site and having an impact on fish stocks, there’s no evidence that there’s not, but if there were issues, the department of health through the public warning system would take action,’ Kelly said.

The EPA’s Bill Freeland also thinks the jury is out, but says there doesn’t appear to be a major off-site pollution problem yet.

‘They have detected isotopes in the fish downstream, which clearly come from the mine, but they are in trace levels so it’s not a significant issue in that sense,’ he says.

‘I think, though, that we need more data and better understanding and I think we just have to be patient. These things can’t be done overnight. It’s very complex.’

The NT government is still investigating the fish contamination, and the federal government is also investigating whether the fish contamination has breached the EPBC Act.

It said in a statement: ‘The independent monitor in their 2012-13 report identified that lead isotope ratios in the environment indicate that the mine could be a source of this contamination. The Department of the Environment is investigating whether identified impacts constitute a breach of the Environmental Protection and Diversity Act.’

While the Territory and federal governments wait for Glencore to submit its EIS, a series of other problems with the waste rock dump have continued to grow. The company has kept adding to the dump, even though the clay used to line its base has failed many of its moisture and compaction tests. The liner is meant to be a key barrier against leaching.

The company has also admitted that because of the waste rock classification mistake, reactive rock has been stored in the base of the dump below the one-in-100-year flood line. Bill Freeland says that’s a major problem for a mine on a floodplain.

‘It’s not acid-generating, but what happens with some rocks, say they’ve got a high level of arsenic or, or lead or whatever it might be, that will leach out and it will become soluble and it will go into the environment,’ he says.

‘It’s exactly the same as acid metalliferous drainage, but it’s not acidic—it’s alkaline. And you get the same sorts of effects.’

To tackle that in the short term, Sam Strohmayr says the company is building a clay and rock flood wall around the dump base.

‘What we’re doing there is putting in flood protection bunding so that in the case, the rare occurrence of a one-in-100-year flood, that the water can’t ingress into the base of the dump,’ he said.

Neither the Mines Department nor the company have been able to yet say whether the reactive rock will have to be taken out of the already-giant dump’s base in the long term.

The company’s key long term problem will be convincing the regulators it can it can find a solution that safely encapsulates all of the reactive rock it needs to dump, with the amount of benign rock available to do that on the site now severely limited—just 10 per cent of the waste it’s mining out. Strohmayr is confident a solution will be found, however.

‘Glencore is 100 per cent committed to McArthur River,’ he says. ‘We have invested a lot of money in McArthur River over the last years. We see McArthur River as a long-life asset. We have 20 years of resource to go.

‘We’re 100 per cent committed to doing things correctly, making sure we’re running the operation firstly in a safe manner, doing it in an environmentally safe manner, and ensuring it’s profitable into the future.’

Instead of waiting to see what Glencore proposes in the EIS, Borroloola residents have commissioned an alternative plan to close the mine.

Activist Lauren Mellor has facilitated the plan, and says residents are worried Glencore’s mine will be left leaking into the environment like many other old mines in the area.

‘They want to see a fully costed and comprehensive closure plan and so they’ve actually fundraised, through the sale of artworks, to raise their own funds to bring on a team of experts who are recognised around Australia as being experts in lead pollution and legacy mine containment and acid metalliferous drainage,’ she says.

‘These experts are coming on board to write this report to look at an option for backfilling that reactive material into the pit.

‘The job will be for the community and those experts to convince the government that this is the most sensible, this is the most cost-effective, this is the best way to deal with this problem.’

One of the closure plan’s authors is Monash University civil engineering department senior lecturer Gavin Mudd.

‘We cannot leave tens to hundreds of millions of tonnes of sulphidic mine waste above ground, and expect that it’s going to be safe forever,’ he said.

‘Sometimes you have to wait 20 years for acid mine drainage problems to really become apparent. At the former Goldsworthy iron ore mine in Western Australia, which was closed in 1994, acid mine drainage problems, like those at McArthur River, only became apparent in 2004, 10 years later.’

Worried that taxpayers could be left carrying the cost of cleaning up the mine site, the NT government last year demanded an increase in the financial bond it holds against Glencore, under the threat of ordering the mine to close.

Chief minister Adam Giles says the bond would pay for a 100 per cent clean-up. But he won’t say how big it is.

‘I don’t make comments about the level of the bond,’ he says.

‘They are commercial in nature, but we just take advice from independent experts to guide is on what the bond should be, and then it’s a negotiation process with the company themselves.’

Bill Freeland hopes the company will be able to keep mining and come up with viable solutions to deal with its problems while protecting the environment.

He says bond or no bond, the last thing Borroloola’s residents and the Australian public need is another legacy mine site. And he says it will be on the taxpayer if the mine goes bust.

‘We would much rather the miner did it and the complexity of what’s got to be done is huge,’ he said.

‘We don’t have, as yet to my mind, an adequate closure plan just for the waste rock dumps. It makes it very difficult to predict how much you’re going to need and all the rest of it.

‘The only certainty is if we’ve got someone there to pay for it, and if they stay there then it solves a lot of problems for everybody.’

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Chinese GRAM gets funding for PanAust’s Frieda River copper mine study

See, its not Papua New Guinea’s Frieda river mine: First it was Xstrata’s and then PanAust’s and now another bit of PNG is owned by the Chinese…

But when did the landowners ever give their consent to the loss of their land and their rights?

And when we will stop letting the industrialized world get ever richer by taking our resources while we just get worse and worse off as we deal with all the environmental and social costs…


Peter Ker | The Age

PanAust suitor Guangdong Rising Asset Management has secured funding to complete a feasibility study into the Frieda River project in Papua New Guinea. 

The Chinese company behind the $1.4 billion takeover of PanAust Limited is set to move quickly on the copper miner’s prize asset, with a preliminary funding deal for the Frieda River project set to be announced as early as Monday.

Guangdong Rising Asset Management’s (GRAM) ownership of PanAust rose to 87.38 per cent by Friday afternoon. The Chinese group will unveil a memorandum of understanding with the Bank of China on Monday as it seeks to convince remaining shareholders to accept the offer.

Under the non-binding agreement that will be announced in Sydney, Bank of China is expected to provide funding to complete the $50 million feasibility study for the $US2 billion Frieda River project, located in the highlands of Papua New Guinea. The bank is also expected to be involved in funding the eventual construction of Frieda River, as well as other PanAust assets around the world.

Officials to attend signing

The agreement is expected to be inked in front of a Chinese delegation to Sydney led by the governor of Guangdong province. GRAM chairman Wei Zhu is expected to attend the event along with officials from PanAust and Bank of China.

GRAM’s offer to pay $1.85 for each PanAust share is scheduled to close on Wednesday. The group requires a further 2.62 per cent of PanAust shares to accept the offer to move to 90 per cent ownership and compulsory acquisition of remaining shares.

GRAM’s move on PanAust is another demonstration of China’s strong interest in copper deposits, following MMG’s purchase of the Las Bambas copper asset in Peru last year and China Molybdenum’s purchase of the Northparkes copper and gold mine in NSW in 2013.

A copper shortage is expected to emerge by the early months of 2017 and is expected to push copper prices higher. The red metal was fetching $US2.79 per pound on Sunday.


Filed under Exploration, Financial returns, Human rights, Mine construction, Papua New Guinea

Xstrata issue clarified

Gynnie Kero | The National aka The Loggers Times

THE sale of Glencore Xstrata’s share of 80% in the Frieda River project to PanAust is subject to a couple of conditions yet to be reached, Highlands Pacific managing director and chief executive John Gooding said.

Gooding was reacting to speculation that the Beijing-ordered sale by Glencore Xstrata of its US$6 billion (K14.5 billion) Las Bambas copper project in Peruis has placed PanAust, Highlands Pacific and Indophil on high alert.

As reported in The Australian recently, the sale of Las Bambas as a condition of Chinese approval of last year’s merger between Glencore and Xstrata – affected the plans of all three companies in their multi-billion-dollar copper-gold projects in PNG (PanAust and Highlands) or in the Philippines (Indophil).

Gooding said: “When Glencore and Xstrata wanted to merge last year, they had to get approval from respective countries in which they both operated.

“While receiving approval from European Union countries and others, the Chinese Ministry of Finance and Commerce (MOFCOM) required that Las Bambas, a new big copper mine being developed in Chile by Xstrata at the time, be sold by mid next year before they would agree to the merger.

“If  an agreement for the sale of Las Bambas was not signed by mid-year (2014), then the Chinese had the right to decide whether another of the copper projects in Xstrata’s stable including Frieda River, would be sold instead.”

Gooding said the whole merger of Xstrata and Glencore seemed to be contingent on the sale of Las Bambas or another of their copper projects.

“We believe that the sale process for Las Bambas is fairly mature and will be consummated in the not too distant future from what we read.

“Once Las Bambas is sold (probably to a Chinese company). then the merger of Xstrata and Glencore should become unconditional as it would satisfy MOFCOM’s requirements, and then so does the sale of Frieda River to PanAust become unconditional.

“In the meantime if MOFCOM approves the sale of Frieda River to PanAust first then that also would be very good for all the stakeholders in Frieda River and the people of PNG as it reduces any uncertainty with regards to timing.

“We are very confident that the sale process of both Las Bambas and Frieda River is robust and that PanAust will be very good partners as they have the track record and capability to deliver this world class project,” Gooding added.
Highlands Pacific owns 20% share in the Frieda River gold and copper project located on the border of Sandaun and East Sepik provinces.

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Glencore’s Las Bambas sale puts Aussies on alert

Barry Fitzgerald | The Australian

SPECULATION that the Beijing-ordered sale by Glencore Xstrata of its $US6 billion ($6.7bn) Las Bambas copper project in Peru is imminent has placed ASX-listed companies PanAust, Highlands Pacific and Indophil on high alert.

The sale of Las Bambas — a condition of Chinese approval of last year’s merger between the London-listed Glencore and Xstrata — affects the plans of all three companies in their multi-billion-dollar copper/gold projects in Papua New Guinea (PanAust and Highlands) or in The Philippines (Indophil).

Merrill Lynch last week tipped that the sale of Las Bambas would be announced “any day”, with the market continuing to have Hong Kong-listed and Melbourne-managed MMG as the most likely buyer in a deal.

Its 72 per cent owner, China Minmetals Corporation (Minmetals) is one of China’s biggest multinational state-owned enterprises.

MMG is best known in this market for acquiring the assets of OZ Minerals other than the Prominent Hill copper-gold mine in South Australia, when it was forced into a drastic debt restructuring in 2007.

MMG’s operations include the Century zinc mine in Queensland, the Rosebery zinc operation in Tasmania and the Golden Grove base and precious metals mines in Western Australia.

MMG would not comment on the Las Bambas speculation on Friday.

MMG does not have the financial capacity to take on Las Bambas itself but Minmetals does, thanks to access to Chinese import/export financing.

MMG also recently deferred a development decision on its $US1.5bn Dugald River zinc project in Queensland.

In the meantime, PanAust, Highlands and Indophil are anxiously awaiting an outcome of the Las Bambas sales process.

In the case of PanAust and Highlands, the deal in which PanAust replaces Glencore in the proposed $US1.8bn modified development plan for the Frieda River copper/gold project in PNG hinges on Glencore meeting Beijing’s condition that it reaches agreement to sell the Las Bambas project before September 30 this year.

Should Glencore fail to complete the transfer of ownership by June 30 next year, the Chinese merger approval requires it put its 80 per cent stake in Frieda River up for auction.

PanAust has since struck a deal to acquire Glencore’s stake for $US75m as well as forming an alliance with the other partner, Highlands Pacific.

However, the deal remains conditional on Glencore meeting the Chinese condition on Las Bambas.

The Melbourne-based Indophil faces similar uncertainty, with Glencore also required to auction off its 62.5 per cent stake in the Tampakan copper/gold project in The Philippines should Las Bambas not be sold.

Glencore also owns a 13.1 per cent equity stake in Indophil. Indophil owns a 37.5 per cent interest in Tampakan.

Tampakan, like Frieda River, is one of the biggest undeveloped copper/gold orebodies in the world.

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PNG needs to toughen up dealings with mining companies

Gabriel Ramoi | PNG Attitude

IT’S NOW OVER FOUR WEEKS since a Reuters’ report republished in PNG Attitude alluded to junior mining company Pan Aust Ltd buying a majority Interest in the Freida mine for about $US125 million. [A similar report in the Wall Street Journal put the value at $US75million.]

In my view, the orchestrated leak to the media could have been deliberately engineered by Pan Aust to pull the wool over the eyes of the PNG government and to execute a grab for cash not dissimilar to the Nautilus debacle.

The architect of this power play seems to be the same person who sits on the cross board of Highlands Pacific, Pan Aust and Nautilus.

When The National newspaper first carried this story at the beginning of November, I personally communicated with a handful of Cabinet ministers, including the acting Mining Minister Ben Micah, to alert them to the report and to point out the obvious – which is that the PNG government is a partner in Freida and has the right of first refusal in acquiring the interest of Xstrata–Glencore ahead of Pan Aust.

I asked them whether, as a matter of policy, the national government will hold on to its 30% equity in Freida or will it make a bid to increase its equity in the mine and whether Xstrata has informed the government of its decision to sell its interest in the mine to Pan Aust.

All the ministers were shocked and angry at this nose thumb to the PNG Cabinet by Pan Aust and said the company had treated the government and people of Papua New Guinea, and the Sepik in particular, with contempt in announcing a deal not sanctioned by the government.

The most glaring issue in the purported deal reached between Xstrata and Pan Aust is the figure placed on the value of the Xstrata interest in Freida.

First the amount outlaid by Xstrata to define the resources of Freida and Nena is now capped by Pan Aust at $US125 million when we know that since 2010 Xstrata spent no more than $US20 million each year on resource evaluation, and even then there were disputes between Xstrata and Highland  Pacific on the quality of the work carried out.

The figure of $US125 is questionable and should be subjected to independent audit should the government of PNG decide to purchase Xstrata’s interest in the mine.

While foreign investment is welcome in PNG, the manner in which Pan Aust has attempted to enter the resource sector is questionable. There are still many areas in PNG where Pan Aust would be welcome to secure exploration rights but these certainly do not include Freida which is a known and verified deposit ready for extraction.

It would come as little surprise to me if Pan Aust is merely a conduit for the sale back to the PNG government of the interest acquired from Xstrata, in the process enriching a number of deal-makers who may have colluded to pull a fast one on the government.

It is now up to the Prime Minister and the Minister for Mines to summon Xstrata forthwith to explain the nature of the arrangement with Pan Aust and for the government to advise Xstrata of its intentions relative to Freida.

It is also important for the East and West Sepik Provinces and their landowners to impress on the Prime Minister and the Minister for Mines whether they also want to hold equity in Freida. Their interest should be rated ahead of any interest expressed by Pan Aust.

The government has before it a unique opportunity to take a 100% controlling interest in Freida as Xstrata exits the project so the government can maximise its income from Freida to meet the development needs of the nation.

It is estimated that the development of Freida will cost $5.6 billion and the PNG government is capable of raising 100% of this using a number of financing models available to it. For example, it can enter into a production sharing agreement with a known contractor to mine Freida on its behalf for a fee.

The government is also now better placed to utilise export credit financing to get Freida off the ground and does not need little companies like Pan Aust to run rings around it. This year alone we have witnessed Nautilus Minerals trying the same trick on the PNG government.

Obviously the view that everything in PNG is available for a price is attracting  the wrong  kind of resource companies who use local compradors to deprive the nation of its resources and wealth.

It is now time for the government to take control of the wealth of the nation and to tell companies such as Nautilus to fund their own operations or, in the case of Pan Aust, apply for new exploration areas to locate and develop new deposits.

This view is in no way a commentary on the debate between economic nationalism and economic rationalism. On the contrary, it aims to prevent economic mercenaries praying on an unsuspecting government and people.

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PanAust sees PNG project transforming it into top copper producer


Australia-listed miner PanAust Ltd said its acquisition of an exploration project in Papua New Guinea from Glencore Xstrata could transform it into one of the world’s top independent copper producers.

PanAust has a market capitalisation of A$1.17 billion ($1.11 billion), dwarfed by a $24 billion capitalisation for Southern Copper Corp, the biggest independent copper producer.

But the Australian miner is benefiting from moves by big mining companies to sell off undeveloped assets and tighten their belts after a cooling of the commodities boom.

PanAust last week agreed to buy 80 percent of the Frieda River copper project in Papua New Guinea from Glencore Xstrata for $125 million.

It expects to spend between $1.5 billion and $1.8 billion to develop a mine initially producing only 100,000 tonnes of copper annually — mid-sized by sector rankings.

Less than a year ago, Xstrata put the capital spending estimate for Frieda River at $5.6 billion.

Xstrata had big plans for Frieda River, which was being designed to yield 300,000 tonnes of copper a year ahead of a decision to merge with Glencore and trim down via asset sales.

The merger was completed in May 2013.

If PanAust reaches the scales envisioned by Xstrata, it would out-produce many of the world’s biggest mines, including BHP Billiton’s Olympic Dam lode in Australia.

Xstrata invested more than $250 million in Frieda River and the work undertaken should help PanAust meet its initial production targets.

PanAust agreed to buy the project only after determining it could be developed on a smaller scale, according to Managing Director Gary Stafford.

“Because it is such a big resource, there will be opportunities to build the business and leverage off that world-class scale deposit,” Stafford told reporters.

PanAust is one of only two companies mining copper in Laos.

It has set an annual production target of 90,000 tonnes of copper in concentrate in Laos in 2018, up nearly a third from the 62,000-65,000 tonnes it expects to mine this year from its Phu Kham deposit.

Under a five-year plan, PanAust could be the world’s sixth-largest independent copper producer immediately behind Kazakhmys, Kazakhstan’s biggest copper producer, according to Stafford.

Stafford said he was undeterred by concerns of flickering resource nationalism in Papua New Guinea.

PanAust reached the deal with Glencore Xstrata within weeks of Papua New Guinea’s parliament passing laws allowing the government to take full ownership of the neighbouring Ok Tedi copper mine.

After meeting with Prime Minister Paul O’Neill and discussing Ok Tedi, Stafford said he was convinced Papua New Guinea wasn’t threatening foreign investors.

“I was happy with his explanation and in that context it was a one-off,” Stafford said.

Once the deal is concluded, PanAust will own 80 percent of Frieda River and Australia-listed Highlands Pacific 20 percent. The Papua New Guinea government has a right to acquire a 30 percent stake in the project.

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Analysts welcome PanAust takeover of Frieda River mine project

Business Advantage PNG

The entry of PanAust—a new player in Papua New Guinea’s mining sector—is good news for the giant Frieda River gold and copper mining project in East Sepik Province. The move has also been welcomed by analysts.

Since Glencore Xstrata indicated late last year that it wanted to get out of the project, there’ve been concerns for the future of what has been regarded as one of the world’s top ten gold and copper prospects.

Brisbane-based PanAust, a company with mining interests in Laos, Thailand and Chile, has agreed to buy an 80% stake in the project for US$79 million (K205 million). The other 20% will continue to be held by Australian junior miner, Highlands Pacific, a company with a strong history in PNG. As with all mineral projects, the PNG State has the right to acquire up to a 30% interest in the venture.

A ‘good deal’

UBS analyst Joe Battershill described the deal as ‘good for PanAust’.

‘PanAust places a lot of emphasis on sustainability and corporate governance’

It would take 12 to 18 months to complete the feasibility study and another two or so years to get production up and running, he told Business Advantage PNG, which fits into the company’s projected schedule.

It’s PanAust’s first foray into PNG, and Battershill says one of the strengths that the company brings to the country is its track record in Laos.

‘When they first went to Laos, there were very few Western countries operating there.

‘It was a difficult from a geopolitical perspective—the terrain, and unexploded ordinances—and what it has achieved there in the last 10 years is nothing short of significant for the country.

‘PanAust places a lot of emphasis on sustainability and corporate governance and I’d like to think it gives the PNG Government a sense it’s doing the right thing by local communities, the government, shareholders and the company.’

Massive project

The project is ‘one of the largest undeveloped copper and gold deposits in the world,’ according to a company statement, which also said Frieda River could produce 100,000 metric tons of copper and 160,000 ounces of gold a year and have a mine life of 18 years, and will need development capital of $1.5 billion to $1.8 billion.

These figures contrast somewhat with the more bullish December 2012 estimates from Xstrata Copper, which identified an estimated capital cost of $5.6 billion, and an estimated average annual production profile of 204,000 tonnes of copper and 305,000 ounces of gold, over a 20-year mine life.

‘From a strategic point of view, Frieda River provides us with the basis for growing production beyond our current mine life in Laos,’ PanAust Managing Director Gary Stafford said in an analysts’ interview. ‘It gives us another string to our bow.’

If the development is successfully completed, departing owner Glencore Xstrata will receive a two per cent royalty payment.

PanAust Profile

PanAust is an Australia-based S&P/ASX100 copper and gold producer
Market Cap: A$1,168 million
Employees: 3,320
Principal assets: include the Phu Kham copper-gold property and the Ban Houayxai gold-silver property located 100km north of the Lao capital Vientiane
It also holds a 60% share of the Inca de Oro copper-gold project in Chile through an alliance with Codelco.
Net first-half profit 2013: US$18.9m million (down 38%)
Expected earnings to December, 2013: between US$260 million and US$ 300 million.

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Frieda River project gets new partner

Post Courier

THE Frieda River gold-copper project now has a new joint venture partner to develop one of the world’s underdeveloped gold and copper deposits.

Highlands Pacific Limited, announced this week a new joint venture partnership for the Frieda River Project which will see Glencore Xstrata plc (Glencore) exit the project and PanAust Limited emerge as an 80% partner with a new vision to develop Frieda.

PanAust will take up to a A$10 million (K24.78 million) placement in Highlands and will also relinquish any claw back rights regarding exploration licence EL 1312 in the Star Mountains.

PanAust has entered into a share sale agreement with Glencore under which PanAust will acquire Glencore’s interest in the Frieda River joint venture by acquiring all of the shares held by Glencore in Xstrata Frieda River Limited (XFRL).

PanAust and Highlands Frieda Limited have agreed that the two parties will hold interests of 80 per cent and 20 per cent respectively in the Frieda River joint venture on completion of PanAust’s acquisition of the shares in XFRL and that any previous disagreement between XFRL and Highlands Frieda relating to earn-in percentages in the Frieda River joint venture will be settled upon completion.

The terms of Highlands’ agreement with PanAust provide that should the Government of PNG elect to take up its right under PNG law to 30 per cent of the project, PanAust (XFRL) will sell down the first 20 per cent of its joint venture interest and thereafter the parties will sell down in equal amounts.

Under a scenario where the Government of PNG elects to take up its maximum 30 per cent of the project, the respective joint venture interests would be PanAust 55 per cent, the Government of PNG 30 per cent, and Highlands Frieda 15 per cent. PanAust is responsible for 100 per cent of the costs incurred by the Frieda River joint venture to finalise a definitive feasibility study for PanAust’s development concept and will appoint and fund the cost of an independent expert to provide peer review. PanAust will also be responsible for 100 per cent of the costs to maintain the Frieda River project site, assets and community relations programs up to the point in time of lodgement of the Mining Lease or Special Mining Lease application.

As part of PanAust’s due diligence work, it completed a scoping study based on a smaller circa 24 million tonne per annum conventional open pit and flotation operation producing a copper-gold concentrate for export to custom smelters. Highlands Pacific managing director John Gooding welcomed the new partnership: “Frieda can be a great copper project for PNG, but developing it as a mega project as first envisaged 5-6 years ago by Xstrata would face a number of challenges given the current market environment. PanAust’s own reviews and studies on a project at approximately half the plant scale, but approximately a third of the costs proposed by Glencore, accords with our own long held views.

“We are very pleased to have PanAust as a substantial and supportive investor in Highlands and the placement means that Highlands’ funding position is robust going forward. We know the PanAust team well and have great respect for their skills in South East Asia and believe they can make a positive contribution to the Frieda River Project and to PNG.”

“With Highlands now holding 100 per cent of its Star Mountains exploration licences we can also look to develop new work programmes and collaborate with potential joint venture partners on these important exploration assets,” he said.

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