Xstrata puts Frieda River copper stake on the block

FROM REUTERS

Global miner Xstrata Plc has put up for sale a stake in the Frieda River copper project in Papua New Guinea, potentially worth more than US$2 billion, as part of a review of its development projects worldwide.

Like other major miners under pressure to conserve capital amid uncertainty over global growth, rising costs and falling commodity prices, world no.4 copper producer Xstrata has flagged it may slow down project spending.

Xstrata has not yet decided whether to sell all or part of its 81.8% stake in Frieda River, an Xstrata spokeswoman said.

"As part of this process we are assessing the interest of other investors in the Frieda River Project in Papua New Guinea," the spokeswoman told Reuters in an email.

Merrill Lynch is advising Xstrata on the potential sale.

A critical concern for any buyer would be the cost of the Frieda River project, last estimated at US$5.3 billion.

That cost could fall if it secures natural gas for its power supply, a key factor in a delayed feasibility study that Xstrata has committed to deliver to its partner, Australian-listed Highlands Pacific, in December.

Chinese companies, possibly including Metallurgical Corp of China (MCC), could be interested in Xstrata's stake, analysts at broker Euroz have said.

MCC is Highlands Pacific's partner on the Ramu nickel project in PNG.

Three analysts on average value Highlands Pacific's 18.2% stake in Frieda River at A$477 million (US$486 million), which would imply Xstrata's 81.8% stake may be worth about US$2.15 billion.

Xstrata has said it wants to become the world's top copper producer, unseating Chile's Codelco, BHP Billiton and Rio Tinto over the next three years.

Charlie Sartain, Xstrata's copper division head, said last month a US$7 billion capital expenditure programme was under way to beef up copper mining, mainly in South America and Australia.

Since then, a decline in copper prices that began in January has accelerated, with the London 3-month contract fetchingUS $7,545 a tonne, orUS$3.42 a pound, down from levels above US$8,650 a tonne at the start of the year.

 Xstrata already has projects under construction designed to boost its copper output by more than 60% to 1.5 million tonnes a year over the next three years, including its Antapaccay project in Peru, due to start producing in the second half of this year.

The company's attempt to sell the Frieda River stake suggests it may prefer to back the Tampakan copper and gold project in the Philippines, which it is looking to develop with Indophil Resources.

Frieda River has an estimated resource of 12 million tonnes of copper and 18.5 million ounces of gold, and could produce 246,000 tonnes of copper a year, according to a pre-feasibility study in 2010.

  

Highlands Pacific said today (Thursday) it hoped to seal an agreement in the next two days to sell a cornerstone stake in the company to PNG Sustainable Development Program Ltd (PNGSDP), a large investment company with strong ties in Papua New Guinea, which could assist in future development.

PNGSDP is the majority shareholder in Ok Tedi Mining Ltd, operator of the Ok Tedi copper mine, once owned by BHP Billiton.
Highlands Pacific shares were on a trading halt pending the outcome of talks with its potential PNG backer.
Indophil's shares rose 4.5% to A$0.35, bucking a 1.5% slide in the metals and mining index .AXMM. ($1=0.9815 Australian dollars)

PNG Sustainable Development Program considers investment in Highlands Pacific

Highlands Pacific Limited today (Thursday June 21) announced that it is in the advanced stages of negotiations on a capital raising with PNG Sustainable Development Program Ltd (PNGSDP), which is considering taking up a cornerstone investment in the company.  

While it is anticipated that a final agreement between Highlands and PNGSDP will be completed within the next two days, an agreement has not been executed at this time and there can be no guarantee that an agreement will be executed within two days or at all.

Managing director of Highlands Pacific John Gooding said today: “While there are still some points to be finalised a relationship with PNGSDP, a company with net assets of over US$1.43 billion, has the potential to deliver significant benefits to Highlands, giving it the financial and technical backing of a very large investment company that has strong ties in Papua New Guinea and is the majority shareholder of Ok Tedi Mining Ltd (OTML), in Western province, PNG. 

"These connections could be crucial for Highlands as it proceeds with any development at the Star Mountains exploration project and also for the future development of the Frieda River project.” 

“In relation to our projects Ramu is progressing well with ore commissioning and ramp‐up continuing, drilling is continuing at the Star Mountains exploration and work on the feasibility study at Frieda River continues. 

"Recently Xstrata Copper has advised that it has commenced a market evaluation of a number of the projects in its portfolio, including Frieda River. 

"This is consistent with their announcement at the May annual general meeting where they stated ‘Xstrata management will optimise the value of the mining portfolio’ and is consistent with the approach of all major mining companies at present.

" Xstrata Copper have also confirmed they are committed to completing the Frieda River Feasibility Study by (or before) December this year.”

About PNG Sustainable Development Program Ltd

PNGSDP was established in 2002, when BHP Billiton divested its 52% shareholding in OTML. PNGSDP has the task to support and promote sustainable development through projects and initiatives to benefit the people of PNG, especially the people of Western province. PNGSDP is also a substantial financial institution with the function of investment of its Long Term Fund and Development Fund so that it can support a high level of development expenditure in Western Province and PNG in general.

PNGSDP is a company registered in Singapore and “limited by guarantee”, which means that it has no share capital, debentures, share options or unissued shares. The total net assets of PNGSDP in 2011 amounted to US$1.43 billion.

About Ok Tedi Mine

OTML operates the Ok Tedi mine which is located in the Star Mountains region of the Western province. The mine started operations in 1984, and has become the single largest business contributor to the economies of the Western province and PNG.

The Ok Tedi mine is a major producer of copper concentrate for the world smelting market in Germany, India, Japan, Korea and the Philippines. The mine exports copper as the main product but it also extracts gold and silver.

Endless potential for beef venture

By MALUM NALU

PAPUA New Guinea has endless potential for beef production, according to the manager of Leron Plains Cattle Ranch, the biggest in the country, The National reports.
 The ranch is owned by Ramu Agri Industries Ltd, which is part of the New Britain Palm Oil Ltd (NBPOL) Group.
It has more than 20,000 head at Leron Plains in the Markham Valley of Morobe province, which are then taken to the feedlot at Gusap in Ramu Valley of Madang province, to be fattened and slaughtered.
Leron manager Bruce Guaran told The National during a visit of the ranch last Thursday that PNG’s beef industry had great potential and should be supported.

Cattle at Leron Plains Cattle Ranch last Thursday. They are raised here and then moved to Gusap to be further fattened and slaughtered.-Nationalpic by MALUM NALU

“It (PNG beef industry) has got endless potential,” he said.
“You need protein in the country.
“It’s Papua New Guinean, not imported.
“It’s fantastic quality for the price.
“It’s a good product.
“New Britain Palm Oil Ltd is investing in the property for the future.
“If the company had not been interested, it would not have invested.”
Guaran said cattle were raised on about 9,000ha of land there before being taken to Gusap.
Apart from grass, they are also fed sorghum grown on site at Leron.
He said calves were raised for six months before being weaned (separated from their source of milk), fed until they weighed about 300kg.
They are then moved to Gusap,  fattened in the feedlot until they weigh 400kg before they are taken to the abattoir to be slaughtered.
“It can be 18 months to two years and they are slaughtered,” Guaran said.
“This (Leron Plains) is the biggest cattle ranch for the company and also the biggest in PNG.
“At present, we have about 30 fulltime staff and 45 casual staff.
“This open grassland plain is great for cattle.
“It’s great cattle country.
“It’s good cropping country too.”
According to NBPOL’s 2011 annual report, the group remained the largest producer of beef in PNG, however, “beef production will continue to play only a minor role in the overall investment strategy of the group”.
“This does not mean that the beef operations will not receive investment, or that beef production cannot be significantly improved to provide a valuable resource to supplement the earning capacity of the group, especially in areas where cattle and oil palms can be intercropped, or in areas where oil palms are unsuited as a sole commercial crop,” it said.
“The group’s herd size showed show growth with 20,000 cattle managed in two separate locations (RAIL 16,500 head and West New Britain 3,500 head).
“The group herd produced some 1, 284,000kg of beef for the PNG market, generating revenue of K14.9 million."

Ramu seeks to hike palm oil production

By MALUM NALU

RAMU Agri Industries Ltd is looking at increasing the capacity of its mill at Gusap in the Ramu Valley to process 45 tonnes of fresh fruit bunches (FFB) per hour by the end of next year, The National reports.
 The current mill at Gusap, which has been in operation since March 2008, was the first to be established in the Momase region with a capacity of 30 tonnes of FFB per hours.
“We are expanding to go up to 45 tonnes an hour,” assistant mill manager John Kuloi told The National in Gusap.

Kulo at work in the mill last Friday.-Nationalpics by MALUM NALU

“All the upgrading on now is to take us up to there.”
Fruit come from Gusap and Dumpu estates, the latter located in the Usino-Bundi area of Madang province past Gusap.
“Ninety-eight per cent of the fruit is from the company estates, while 2% is from smallholders,” Kuloi said.
“We have 99 employees, most of whom are nationals, and only one expatriate in mill manager Geoff Downs.
“We operate two shifts.
“We have a maintenance crew, an administration crew, and a project upgrading crew.

Fresh fruit being boiled in the mill last Friday.

“Our storage capacity at the Gusap mill is 2,000mt of crude palm oil (CPO) held in two tanks of 1,000mt  each, and a tank of palm kernel oil (PKO) with a storage of 250 metric tonnes.
“We have a separate oil storage facility in Lae.
“It has a capacity of 5,000 tonnes crude palm oil and 600 tonnes palm kernel oil.
“With upgrading, the total in Lae will go up to 7,500 tonnes crude palm oil while palm kernel oil will remain constant at 600 tonnes.”
RAIL has been part of the New Britain Palm Oil (NBPOL) Group – a world leader in the palm oil industry - since 2008.
According to NBPOL’s 2011 annual report, the new plantings at RAIL were carried out at the beginning of the year and at the new mini-estate at Ngaru under the lease/lease-lease model at the end of the year.
“There remains approximately 1,400ha of customary land that is likely to become available in the near future,” the report said.
“Nearly 2,000ha of additional customary land have been identified, and there is potentially much more along both the Markham and Ramu valleys.
“A significant proportion of the soils in the Ramu Valley are threaded with gravel streams, a legacy of major landslips due to young igneous rock, coupled with high tectonic activity and heavy rains.
“The water-holding capacity in these soils is poor, leading to soil moisture deficits during the drier part of the year.
“In response to the challenge, RAIL has embarked on an ambitious plan to trial several irrigation delivery systems over an area of 1,100ha.
“Irrigated palms on land with significant soil moisture deficit will potentially yield 50% more fruit, like for example, an additional 10t/ha of FFB per annum.”
As reported in The National yesterday, the biggest-ever multi-million kina water irrigation project in PNG is being built at Gusap by RAIL for its palm oil estate.
The 440km long irrigation project, the first of its kind in PNG, is at the core of RAIL’s plans for palm oil expansion in Gusap and could set the benchmark for such similar projects in the country