By Ian Bickis, special to The Northern Miner
PORT MORESBY, PAPUA NEW GUINEA — Rising out of the sea at
the collision of the Pacific and Indo-Australian tectonic plates, Papua New
Guinea is the stuff of legend for both its geological potential and punishing
working environment.
For miners and explorers, PNG has long presented a tough
trade-off between the two, requiring major commitments to access the rich
deposits.
In the early 1930s the rugged island was the site of the
world’s first major air-supported mining project, when Canadian miner Placer Development
used modified Junkers planes to fly in dredge equipment to its Bulolo gold
project. With individual payloads of less than 3 tonnes, the Junkers hauled in
almost 36,000 tonnes of gear. The determination paid off, with the company
pulling out some 1.3 million oz. gold from the river over the next 10 years.
Fast-forward to today and logistics is still one of the
biggest barriers to operating in PNG. The whole country has about 3,000 km of
paved roads, plus roughly 6,000 km of dirt ones in varying states of repair.
(Compare that to Sweden, which has 573,000 km of roads squeezed into the
same-sized country.)
The PNG government is aware of the barrier, with Prime
Minister Peter O’Neill committing to improve the transportation network in a
speech to Australia’s National Press Club last year.
“One of our greatest needs is to repair, upgrade and most
certainly expand our economically vital infrastructure,” O’Neill said.
But the lure of riches has been a strong motivator for
miners to overcome such challenges independently and develop some of the
world’s biggest deposits. These include epithermal deposits like Newcrest
Mining’s (NM-T, NMC-A) Lihir mine, which has already produced 9 million oz.
gold and still has 33 million in reserves, and Barrick Gold’s (ABX-T, ABX-N)
Porgera mine, which has produced over 17 million oz. gold and has over 6
million oz. in reserves.
The copper-gold porphyry systems are equally impressive,
with the Wafi-Golpu joint venture between Newcrest and Harmony Gold (HMY-N)
sitting on 28.5 million oz. gold and 20 billion lb. copper; Xstrata’s (XTA-L)
Frieda River project hosting 14.8 million oz. gold and 20.7 billion lb. copper;
and the Ok Tedi mine, now owned by the PNG government, already producing over
11 million oz. gold and 27 billion lb. copper since 1984, with years of mine
life left.
Numbers like these put PNG as the third most geologically
prospective place on earth in the Fraser Institute’s 2012 annual mining survey,
at least when setting aside regulations and land-use policies.
The huge, untapped potential is what drew Marengo Mining
(MRN-T, MGO-A) to the country in 2005.
“It was really just born out of looking for an opportunity
for a junior company to do something quite exciting and have a project of
significant value,” Dean Richardson, Marengo’s investor relations
representative, said by phone.
In a few years the company has turned its Yandera
copper-gold-moly project into a 4 billion lb. copper resource, with 486 million
measured-and-indicated tonnes grading 0.37% copper. Marengo plans to release a
feasibility study on the well-advanced project in March, with a development
capital expenditure of around US$1.8 billion and anticipated annual production
of 200 million lb. copper.
“We’re talking about a project somewhere around 30 million
tonnes per annum. It really is a project that a number of medium- to large-size
companies would be happy to get their hands on,” Richardson says.
Marengo has several years on PNG Gold (PGK-V), which only
started exploring in the country in 2011. But already PNG Gold has pulled some
intriguing gold hits, and it plans to have a resource out later this year.
Results from the company’s Imwauna project, sitting on an island just off the
southern tip of PNG’s mainland, include 6 metres grading 111.97 grams gold per
tonne, 4 metres of 49.86 grams gold and 6 metres of 36.16 grams gold.
The company found it rough-going at the start with
slower-than-expected drilling, but it is now managing 4,000 metres a month with
four of its own rigs, and is well on its way to a resource.
“We had some real teething pains at the beginning,” PNG Gold
president Neil Halldorson says. He adds that the company has had to carry a lot
more spare parts and be careful about planning heavy equipment moves, as poor
planning with either can set a project back. “Over time we’ve learned to work
with those issues, and with every month we get better at it,” he says.
But Halldorson embraces the challenge, because it keeps a
lot of competing juniors away and gives any company that can overcome these
challenges a real advantage.
“There are very, very few juniors in Papua New Guinea, and a
good deal of that has to do with cost and logistics, and everything else. So it
really does act as a barrier,” Halldorson says.
Explorers WCB Resources (WCB-V) and Vangold Resources
(VAN-V) have also made an entrance, with active exploration programs in the
country.
But some haven’t fared so well with the high costs, with New
Guinea Gold (NGG-V) shuttering its small Sinivit gold mine last year after it
ran out of money. The company is trying to get itself going again, but with its
shares trading at a penny, raising money isn’t easy. Papuan Precious Metals
(PAU-V), hovering around 2¢, has also struggled in the country.
Size helps when developing projects in PNG: Newcrest and
Harmony are running the Hidden Valley gold-silver mine despite a few
operational issues; Metallurgical Corp. of China opened its Ramu nickel-cobalt
mine last year despite years of environmental delays; and Newcrest is finishing
up a US$1.3-billion expansion of its Lihir mine to expand designed output to a
million oz. a year after spending A$9.5 billion buying the mine in 2009.
These projects, plus Exxon Mobil’s (XOM-N) US$19-billion
natural gas project, have helped keep PNG’s economic growth rate at close to 8%
for the past decade.
And while growth has been strong in recent years, the
country could see much more investment, thanks to sizeable projects in the
pipeline. Australian bank ANZ released a study estimating that PNG’s natural
resource sector, including mining, oil and gas, could quadruple by 2030, with
some US$25 billion in annual export revenues, or as much as US$38 billion,
using more optimistic assumptions. Achieving such an increase in output would
require US$130 billion in capital investment.
But those estimates rest on projects going forward, even as
several major miners have signalled plans to exit PNG, as companies worldwide
look to contain costs and focus on core assets.
In mid-2012, Xstrata signalled its intention to offload its
Frieda River project, while a feasibility study on the project at the end of
last year added US$300 million to project capex, which totalled US$5.6 billion.
In 2011, Inmet Mining (IMN-T) bowed out of PNG after selling off its 18%
interest in Ok Tedi Mining for US$355 million.
On a smaller scale, Newmont Mining (NMC-T, NEM-N) told its
junior partner Triple Plate Junction (TPJ-L) that it would end its search for
big porphyry systems at Morobe after spending US$15 million to earn 75% of the
project. And Barrick informed joint-venture partner Coppermoly in mid-2012 that
it was looking to sell its 72% stake in three tenements after spending US$22
million to earn-in on the properties.
And some smaller skirmishes with companies may make others
wary of PNG. Last year Aldridge Minerals (AGM-V) pulled out of PNG after the
government declined to renew the junior’s Kili Teke copper-gold licence. And
more publicly, Nautilus Minerals (NUS-T) has been stymied in its efforts to
advance the world’s first major deep-sea mining project after getting embroiled
in licensing and financial disagreements with the government. The company
suspended construction of the $450-million project late last year.
While cost and operational risks worry some, mining analyst
Cathy Moises of Evans and Partners, who tracks several operators in the
country, said by phone that “as long as you do your groundwork in PNG, you’ve
got the locals on side, and have done things the right way — then it’s actually
a very good place to work.”
Good relations with locals are important in PNG, as
landowners control 97% of the country, and there are no large tracts of
government land.
Companies big and small have had trouble with landowners,
with Barrick’s Porgera, Newcrest’s Lihir mine and New Guinea Gold’s ailing
Sinivit mine all shut down by locals last year.
But Moises downplays the problems with landowners.
“It’s not a major issue. If the mine is shut down it’s
usually short in duration, and minor,” she says. “PNG tends to be fairly
stable.”
Moises still likes what she sees in PNG, even if it’s a
country that doesn’t give up its deposits easily.
“I still think there are some big projects to be found. The
terrain and working over there is difficult, so it certainly hasn’t had the
attention of some other countries where it’s nice and flat, and you’re much
closer to civilization.”
The high-stakes world of Papua New Guinea mining
Site Visit
TEXT SIZE 
By: Ian Bickis, special to The Northern Miner
2013-02-27
PORT
MORESBY, PAPUA NEW GUINEA — Rising out of the sea at the collision of
the Pacific and Indo-Australian tectonic plates, Papua New Guinea is the
stuff of legend for both its geological potential and punishing working
environment.
For miners and explorers, PNG has long presented a tough trade-off
between the two, requiring major commitments to access the rich
deposits.
In the early 1930s
the rugged island was the site of the world’s first major air-supported
mining project, when Canadian miner Placer Development used modified
Junkers planes to fly in dredge equipment to its Bulolo gold project.
With individual payloads of less than 3 tonnes, the Junkers hauled in
almost 36,000 tonnes of gear. The determination paid off, with the
company pulling out some 1.3 million oz. gold from the river over the
next 10 years.
Fast-forward to
today and logistics is still one of the biggest barriers to operating in
PNG. The whole country has about 3,000 km of paved roads, plus roughly
6,000 km of dirt ones in varying states of repair. (Compare that to
Sweden, which has 573,000 km of roads squeezed into the same-sized
country.)
The PNG government
is aware of the barrier, with Prime Minister Peter O’Neill committing to
improve the transportation network in a speech to Australia’s National
Press Club last year.
“One of our greatest needs is to repair, upgrade and most certainly expand our economically vital infrastructure,” O’Neill said.
But the lure of
riches has been a strong motivator for miners to overcome such
challenges independently and develop some of the world’s biggest
deposits. These include epithermal deposits like Newcrest Mining’s (NM-T, NMC-A) Lihir mine, which has already produced 9 million oz. gold and still has 33 million in reserves, and Barrick Gold’s (ABX-T, ABX-N) Porgera mine, which has produced over 17 million oz. gold and has over 6 million oz. in reserves.
The copper-gold porphyry systems are equally impressive, with the Wafi-Golpu joint venture between Newcrest and Harmony Gold (HMY-N) sitting on 28.5 million oz. gold and 20 billion lb. copper; Xstrata’s
(XTA-L) Frieda River project hosting 14.8 million oz. gold and 20.7
billion lb. copper; and the Ok Tedi mine, now owned by the PNG
government, already producing over 11 million oz. gold and 27 billion
lb. copper since 1984, with years of mine life left.
Numbers like these
put PNG as the third most geologically prospective place on earth in the
Fraser Institute’s 2012 annual mining survey, at least when setting
aside regulations and land-use policies.
The huge, untapped potential is what drew Marengo Mining (MRN-T, MGO-A) to the country in 2005.
“It was really just
born out of looking for an opportunity for a junior company to do
something quite exciting and have a project of significant value,” Dean
Richardson, Marengo’s investor relations representative, said by phone.
In a few years the
company has turned its Yandera copper-gold-moly project into a 4 billion
lb. copper resource, with 486 million measured-and-indicated tonnes
grading 0.37% copper. Marengo plans to release a feasibility study on
the well-advanced project in March, with a development capital
expenditure of around US$1.8 billion and anticipated annual production
of 200 million lb. copper.
“We’re talking about
a project somewhere around 30 million tonnes per annum. It really is a
project that a number of medium- to large-size companies would be happy
to get their hands on,” Richardson says.
Marengo has several years on PNG Gold
(PGK-V), which only started exploring in the country in 2011. But
already PNG Gold has pulled some intriguing gold hits, and it plans to
have a resource out later this year. Results from the company’s Imwauna
project, sitting
on an island just off the southern tip of PNG’s mainland, include 6
metres grading 111.97 grams gold per tonne, 4 metres of 49.86 grams gold
and 6 metres of 36.16 grams gold.
The company found it rough-going at the start with
slower-than-expected drilling, but it is now managing 4,000 metres a
month with four of its own rigs, and is well on its way to a resource.
“We had some real
teething pains at the beginning,” PNG Gold president Neil Halldorson
says. He adds that the company has had to carry a lot more spare parts
and be careful about planning heavy equipment moves, as poor planning
with either can set a project back. “Over time we’ve learned to work
with those issues, and with every month we get better at it,” he says.
But Halldorson
embraces the challenge, because it keeps a lot of competing juniors away
and gives any company that can overcome these challenges a real
advantage.
“There are very,
very few juniors in Papua New Guinea, and a good deal of that has to do
with cost and logistics, and everything else. So it really does act as a
barrier,” Halldorson says.
Explorers WCB Resources (WCB-V) and Vangold Resources (VAN-V) have also made an entrance, with active exploration programs in the country.
But some haven’t fared so well with the high costs, with New Guinea Gold
(NGG-V) shuttering its small Sinivit gold mine last year after it ran
out of money. The company is trying to get itself going again, but with
its shares trading at a penny, raising money isn’t easy. Papuan Precious Metals (PAU-V), hovering around 2¢, has also struggled in the country.
Size helps when
developing projects in PNG: Newcrest and Harmony are running the Hidden
Valley gold-silver mine despite a few operational issues; Metallurgical
Corp. of China opened its Ramu nickel-cobalt mine last year despite
years of environmental delays; and Newcrest is finishing up a
US$1.3-billion expansion of its Lihir mine to expand designed output to a
million oz. a year after spending A$9.5 billion buying the mine in
2009.
These projects, plus Exxon Mobil’s (XOM-N) US$19-billion natural gas project, have helped keep PNG’s economic growth rate at close to 8% for the past decade.
And while growth has
been strong in recent years, the country could see much more
investment, thanks to sizeable projects in the pipeline. Australian bank
ANZ released a study estimating that PNG’s natural resource sector,
including mining, oil and gas, could quadruple by 2030, with some US$25
billion in annual export revenues, or as much as US$38 billion, using
more optimistic assumptions. Achieving such an increase in output would
require US$130 billion in capital investment.
But those estimates
rest on projects going forward, even as several major miners have
signalled plans to exit PNG, as companies worldwide look to contain
costs and focus on core assets.
In mid-2012, Xstrata
signalled its intention to offload its Frieda River project, while a
feasibility study on the project at the end of last year added US$300
million to project capex, which totalled US$5.6 billion. In 2011, Inmet Mining (IMN-T) bowed out of PNG after selling off its 18% interest in Ok Tedi Mining for US$355 million.
On a smaller scale, Newmont Mining (NMC-T, NEM-N) told its junior partner Triple Plate Junction
(TPJ-L) that it would end its search for big porphyry systems at Morobe
after spending US$15 million to earn 75% of the project. And Barrick
informed joint-venture partner Coppermoly in mid-2012 that it was
looking to sell its 72% stake in three tenements after spending US$22
million to earn-in on the properties.
And some smaller skirmishes with companies may make others wary of PNG. Last year Aldridge Minerals
(AGM-V) pulled out of PNG after the government declined to renew the
junior’s Kili Teke copper-gold licence. And more publicly, Nautilus Minerals
(NUS-T) has been stymied in its efforts to advance the world’s first
major deep-sea mining project after getting embroiled in licensing and
financial disagreements with the government. The company suspended
construction of the $450-million project late last year.
While cost and
operational risks worry some, mining analyst Cathy Moises of Evans and
Partners, who tracks several operators in the country, said by phone
that “as long as you do your groundwork in PNG, you’ve got the locals on
side, and have done things the right way — then it’s actually a very
good place to work.”
Good relations with
locals are important in PNG, as landowners control 97% of the country,
and there are no large tracts of government land.
Companies big and
small have had trouble with landowners, with Barrick’s Porgera,
Newcrest’s Lihir mine and New Guinea Gold’s ailing Sinivit mine all shut
down by locals last year.
But Moises downplays the problems with landowners.
“It’s not a major
issue. If the mine is shut down it’s usually short in duration, and
minor,” she says. “PNG tends to be fairly stable.”
Moises still likes what she sees in PNG, even if it’s a country that doesn’t give up its deposits easily.
“I still think there
are some big projects to be found. The terrain and working over there
is difficult, so it certainly hasn’t had the attention of some other
countries where it’s nice and flat, and you’re much closer to
civilization.” - See more at:
http://www.northernminer.com/news/the-high-stakes-world-of-papua-new-guinea-mining/1002105689/?type=HotSectors#sthash.LcLd251i.dpuf
The high-stakes world of Papua New Guinea mining
Site Visit
TEXT SIZE
By: Ian Bickis, special to The Northern Miner
2013-02-27
PORT
MORESBY, PAPUA NEW GUINEA — Rising out of the sea at the collision of
the Pacific and Indo-Australian tectonic plates, Papua New Guinea is the
stuff of legend for both its geological potential and punishing working
environment.
For miners and explorers, PNG has long presented a tough trade-off
between the two, requiring major commitments to access the rich
deposits.
In the early 1930s
the rugged island was the site of the world’s first major air-supported
mining project, when Canadian miner Placer Development used modified
Junkers planes to fly in dredge equipment to its Bulolo gold project.
With individual payloads of less than 3 tonnes, the Junkers hauled in
almost 36,000 tonnes of gear. The determination paid off, with the
company pulling out some 1.3 million oz. gold from the river over the
next 10 years.
Fast-forward to
today and logistics is still one of the biggest barriers to operating in
PNG. The whole country has about 3,000 km of paved roads, plus roughly
6,000 km of dirt ones in varying states of repair. (Compare that to
Sweden, which has 573,000 km of roads squeezed into the same-sized
country.)
The PNG government
is aware of the barrier, with Prime Minister Peter O’Neill committing to
improve the transportation network in a speech to Australia’s National
Press Club last year.
“One of our greatest needs is to repair, upgrade and most certainly expand our economically vital infrastructure,” O’Neill said.
But the lure of
riches has been a strong motivator for miners to overcome such
challenges independently and develop some of the world’s biggest
deposits. These include epithermal deposits like Newcrest Mining’s (NM-T, NMC-A) Lihir mine, which has already produced 9 million oz. gold and still has 33 million in reserves, and Barrick Gold’s (ABX-T, ABX-N) Porgera mine, which has produced over 17 million oz. gold and has over 6 million oz. in reserves.
The copper-gold porphyry systems are equally impressive, with the Wafi-Golpu joint venture between Newcrest and Harmony Gold (HMY-N) sitting on 28.5 million oz. gold and 20 billion lb. copper; Xstrata’s
(XTA-L) Frieda River project hosting 14.8 million oz. gold and 20.7
billion lb. copper; and the Ok Tedi mine, now owned by the PNG
government, already producing over 11 million oz. gold and 27 billion
lb. copper since 1984, with years of mine life left.
Numbers like these
put PNG as the third most geologically prospective place on earth in the
Fraser Institute’s 2012 annual mining survey, at least when setting
aside regulations and land-use policies.
The huge, untapped potential is what drew Marengo Mining (MRN-T, MGO-A) to the country in 2005.
“It was really just
born out of looking for an opportunity for a junior company to do
something quite exciting and have a project of significant value,” Dean
Richardson, Marengo’s investor relations representative, said by phone.
In a few years the
company has turned its Yandera copper-gold-moly project into a 4 billion
lb. copper resource, with 486 million measured-and-indicated tonnes
grading 0.37% copper. Marengo plans to release a feasibility study on
the well-advanced project in March, with a development capital
expenditure of around US$1.8 billion and anticipated annual production
of 200 million lb. copper.
“We’re talking about
a project somewhere around 30 million tonnes per annum. It really is a
project that a number of medium- to large-size companies would be happy
to get their hands on,” Richardson says.
Marengo has several years on PNG Gold
(PGK-V), which only started exploring in the country in 2011. But
already PNG Gold has pulled some intriguing gold hits, and it plans to
have a resource out later this year. Results from the company’s Imwauna
project, sitting
on an island just off the southern tip of PNG’s mainland, include 6
metres grading 111.97 grams gold per tonne, 4 metres of 49.86 grams gold
and 6 metres of 36.16 grams gold.
The company found it rough-going at the start with
slower-than-expected drilling, but it is now managing 4,000 metres a
month with four of its own rigs, and is well on its way to a resource.
“We had some real
teething pains at the beginning,” PNG Gold president Neil Halldorson
says. He adds that the company has had to carry a lot more spare parts
and be careful about planning heavy equipment moves, as poor planning
with either can set a project back. “Over time we’ve learned to work
with those issues, and with every month we get better at it,” he says.
But Halldorson
embraces the challenge, because it keeps a lot of competing juniors away
and gives any company that can overcome these challenges a real
advantage.
“There are very,
very few juniors in Papua New Guinea, and a good deal of that has to do
with cost and logistics, and everything else. So it really does act as a
barrier,” Halldorson says.
Explorers WCB Resources (WCB-V) and Vangold Resources (VAN-V) have also made an entrance, with active exploration programs in the country.
But some haven’t fared so well with the high costs, with New Guinea Gold
(NGG-V) shuttering its small Sinivit gold mine last year after it ran
out of money. The company is trying to get itself going again, but with
its shares trading at a penny, raising money isn’t easy. Papuan Precious Metals (PAU-V), hovering around 2¢, has also struggled in the country.
Size helps when
developing projects in PNG: Newcrest and Harmony are running the Hidden
Valley gold-silver mine despite a few operational issues; Metallurgical
Corp. of China opened its Ramu nickel-cobalt mine last year despite
years of environmental delays; and Newcrest is finishing up a
US$1.3-billion expansion of its Lihir mine to expand designed output to a
million oz. a year after spending A$9.5 billion buying the mine in
2009.
These projects, plus Exxon Mobil’s (XOM-N) US$19-billion natural gas project, have helped keep PNG’s economic growth rate at close to 8% for the past decade.
And while growth has
been strong in recent years, the country could see much more
investment, thanks to sizeable projects in the pipeline. Australian bank
ANZ released a study estimating that PNG’s natural resource sector,
including mining, oil and gas, could quadruple by 2030, with some US$25
billion in annual export revenues, or as much as US$38 billion, using
more optimistic assumptions. Achieving such an increase in output would
require US$130 billion in capital investment.
But those estimates
rest on projects going forward, even as several major miners have
signalled plans to exit PNG, as companies worldwide look to contain
costs and focus on core assets.
In mid-2012, Xstrata
signalled its intention to offload its Frieda River project, while a
feasibility study on the project at the end of last year added US$300
million to project capex, which totalled US$5.6 billion. In 2011, Inmet Mining (IMN-T) bowed out of PNG after selling off its 18% interest in Ok Tedi Mining for US$355 million.
On a smaller scale, Newmont Mining (NMC-T, NEM-N) told its junior partner Triple Plate Junction
(TPJ-L) that it would end its search for big porphyry systems at Morobe
after spending US$15 million to earn 75% of the project. And Barrick
informed joint-venture partner Coppermoly in mid-2012 that it was
looking to sell its 72% stake in three tenements after spending US$22
million to earn-in on the properties.
And some smaller skirmishes with companies may make others wary of PNG. Last year Aldridge Minerals
(AGM-V) pulled out of PNG after the government declined to renew the
junior’s Kili Teke copper-gold licence. And more publicly, Nautilus Minerals
(NUS-T) has been stymied in its efforts to advance the world’s first
major deep-sea mining project after getting embroiled in licensing and
financial disagreements with the government. The company suspended
construction of the $450-million project late last year.
While cost and
operational risks worry some, mining analyst Cathy Moises of Evans and
Partners, who tracks several operators in the country, said by phone
that “as long as you do your groundwork in PNG, you’ve got the locals on
side, and have done things the right way — then it’s actually a very
good place to work.”
Good relations with
locals are important in PNG, as landowners control 97% of the country,
and there are no large tracts of government land.
Companies big and
small have had trouble with landowners, with Barrick’s Porgera,
Newcrest’s Lihir mine and New Guinea Gold’s ailing Sinivit mine all shut
down by locals last year.
But Moises downplays the problems with landowners.
“It’s not a major
issue. If the mine is shut down it’s usually short in duration, and
minor,” she says. “PNG tends to be fairly stable.”
Moises still likes what she sees in PNG, even if it’s a country that doesn’t give up its deposits easily.
“I still think there
are some big projects to be found. The terrain and working over there
is difficult, so it certainly hasn’t had the attention of some other
countries where it’s nice and flat, and you’re much closer to
civilization.” - See more at:
http://www.northernminer.com/news/the-high-stakes-world-of-papua-new-guinea-mining/1002105689/?type=HotSectors#sthash.LcLd251i.dpuf
