|Panguna mine on Bougainville Island is one of the worlds richest copper mines Source: The Australian|
TALKS are under way on reopening one of the world's biggest copper and gold mines, on Australia's doorstep -- the Bougainville mine that last produced ore 22 years ago and was widely believed to have closed forever.
The seemingly unstoppable China-driven commodities boom has pushed up prices, so the reserves in the Bougainville pit are now worth about $50 billion.
Its port, its access road up 30km of rugged terrain and its 200 million tonnes of pre-stripped ore are ready and waiting.
Crucially, leaders on Bougainville -- including former combatants and elected politicians -- are all calling for the mine to reopen, although they have yet to agree on the conditions they require.
"The key to the door," Bougainville Copper chairman and managing director Peter Taylor said, "is the landowners."
Nothing could happen "until they say to BCL, as a united group, 'We want the mine and we want you to run it' ".
"Then I'll focus on the process that would follow."
Veteran politician and former Catholic priest John Momis, the recently elected President of Bougainville -- an autonomous region of Papua New Guinea -- said: "We are keen to reopen the mine and we are holding talks with the landowners."
BCL's share price has doubled since August and trebled since May, as canny investors have watched vital and promising talks begin.
Bougainville Copper, which is 53.58 per cent-owned by Rio, 19.06 per cent by the Papua New Guinea government and 27.36 per cent by other shareholders, estimates it will cost about $3bn to reopen the mine, whose production was suspended on May 15, 1989.
The trucks and the electricity pylons may have been blown up, rusted or cannibalised, but the resources in the mine have not been damaged or diminished over the past 21 years. It contains 3.5 million tonnes of copper, today worth about $32.4bn, and 12.7 million ounces of gold, worth today about $17.8bn.
There are more reserves beyond the pit but still in the mine lease area.
The mine as presently configured is capable of producing up to 170,000 tonnes of copper and 500,000 ounces of gold annually.
The copper price has quadrupled since the mine closed, the gold price seven times.
The values of the two metals have usually run counter-cyclically, but this year they have peaked together.
But the cost of capital is also high, and is likely to come at a premium given the tumultuous history of the mine.
Former Australian prime minister Bob Hawke, who has close Chinese commercial connections, in late November visited Port Moresby, where he talked with Prime Minister Michael Somare and Mr Momis.
The discussions included plans to reopen the Bougainville mine.
After leading a Bougainville delegation of 34 on a visit to China, where he was once the PNG ambassador, Mr Momis said: "The Chinese have expressed an interest in the mine, but we are keeping all our options open."
The overwhelming focus of 40 years ago on the mine as a national economy maker or breaker is no longer present.
It would remain the crucial income earner for Bougainville itself, but for PNG the spotlight has shifted to the $16.5bn ExxonMobil-led venture piping gas from the Southern Highlands to Port Moresby, where it will be liquefied for export to Asia. This is by far the biggest project ever conceived in the Pacific islands.
In this context, Port Moresby might more readily contemplate transferring its 19 per cent ownership of Bougainville Copper to the island itself -- where preliminary discussions have contemplated the autonomous government retaining 60 per cent, and the landowners taking 40 per cent.
On a pro rata basis, the owners of PNG's 19 per cent share would have to raise $570 million towards the mine's reopening.
It is possible Chinese entities, eager to obtain reliable sources of resources, may be prepared to help fund it, either in return for equity, or for future copper output.