Frieda River partners to hold talks with PNG government

By MALUM NALU

Partners in the multi-billion dollar Frieda River copper-gold project in East Sepik province will hold discussions with all parties, including the Papua New Guinea government, to determine the project’s development path and the desire of the PNG government to take up to a direct 30% equity stake in the project.”

Highlands Pacific managing director John Gooding said on Monday that subject to such discussions and future applications and approvals in 2013/2014, “we believe Frieda’s development could commence mid‐decade with first production later this decade”.

John Gooding

“Frieda is a great project and vital to the future of a growing PNG economy, given Ok Tedi mine’s declining production and the delay anticipated with new emerging projects, like Wafi‐Golpu that are unlikely to be into full production until later next decade,” he said.

“Frieda’s upfront capital spend is reflective of a greenfield start up and also of the major depreciation in value of the US dollar in the past 3‐5 years which has seen new projects worldwide increase in US dollar cost terms.

“The estimated life of mine C1 (net direct cash cost cash) cost of US111 c/lb of copper is on a par with both current world production and also with new greenfield developments.

However, in Highland’s view this underplays Frieda’s low cost profile and cash flow in its important early years, particularly given the 356,000 tonnes of copper and 554,000 ounces of gold in the second full year of the proposed mine schedule.”

“The commodity price assumptions used by Highlands for the Frieda Project, of US$3.00/lb copper and US$1,500/oz gold, are comparable with the $3.10/lb copper and $1,250/oz gold used in the Pre‐Feasibility Study for another great emerging PNG project Wafi‐Golpu, which has an estimated payback period of 16 years compared with Frieda’s 4.8 years.”

Gooding said the  project would produce substantial cashflows at the forecast metal prices for almost 20 years on the current resource, with potential to increase the mine’s life further with additional resources both at depth and along strike given appropriate economic conditions at that time.”

“Highlands believes the investment case for Frieda is compelling, given that copper remains one of the few global commodities that almost all analysts agree is facing a long term and structural supply deficit and given the flight to gold in the past decade as a safe haven,” he said.

“Projects of Frieda’s scale and resource quality are rare due to its low strip ratio, clean concentrate produced and its multi‐decade open pit operation which lowers its risk profile.

“Rare also because it is in a jurisdiction with a stable foreign investment climate, clear rules of law and a new supportive and motivated national government that has the best interests for its people by pursuing a pro‐mining and investment strategy for the growth of the nation.”