http://www.businessday.com.au/…n-way-20120817-24dry.html
August 18, 2012
Brian Robins
Exploiting PNG's mineral wealth takes long negotiation and the full co-operation of the local landowners, writes Brian Robin
For long-time expat Australian Lindsay Semple, who has been
kicking around Bougainville for a few years now, it was the deal of a
lifetime.
Semple had allegedly paid 20 million kina ($9 million) to the Autonomous
Bougainville President, Joseph Kabui, to win exploration access to 70
per cent of Bougainville, but Kabui's death in 2008 derailed this.
Recently, Semple claims he cut another deal with the Autonomous
Bougainville government, which he has backed into a Canadian-listed
minnow, Morumbi Resources, where he has been appointed the executive.
But the Bougainville government says otherwise.
Welcome to the world of doing business in Papua New Guinea, where fact and fiction can sometimes seem to merge.
Notwithstanding Semple's manoeuvring on Bougainville, Bougainville
Copper has been making solid, if quiet, progress to resurrect its
long-idled Panguna copper mine, while across the country work is moving
ahead on the Mount Kare gold deposit.
Ring a bell? It was found by CRA, a Rio Tinto forerunner, in the late
1980s when the then exploration manager discovered a gold nugget while
digging the toilet for an exploration camp in the highlands. That find
triggered a gold rush by the local villagers in early 1988, which
ultimately forced CRA to abandon the area as the locals ran riot.
............................Exploration work has proceeded in fits and starts since and, while there
is little doubt about the economics of the gold deposit, the key is
winning - and sustaining - the support of warring local villagers for a
mine.
There is an unusual symbiosis between Mount Kare and the Bougainville
copper mine, since it was also in 1988 that Bougainville Copper, which
is also controlled by Rio, suffered the first of a series of explosions
that led to the closure of what was then one of the largest copper mines
in the world. Those explosions, of the power pylons leading to the
mine, were the start of the insurrection that led to the mine closure by
mid-1989.
For Stephen Promnitz, formerly with Kingsgate Consolidated and who now
runs Indochine Mining, which is trying to develop the Mount Kare
deposit, PNG presents few new challenges since he cut his teeth as a
geologist at Mount Kare. ''With the newly elected government, PNG is in a
de-risking phase,'' Promnitz said of the political risk in the country,
after the recent changes in Port Moresby.
Indochine is finalising its pre-feasibility study for a prospective $120
to $150 million mine project and has hired a Melanesian Fijian, George
Niumataiwalu, to help win over local landowners. He is credited with
taking the Hidden Valley resource to a completed project for its owners,
Harmony and Newcrest Mining.
At Mount Kare, a 1.8 million ounce resource grading an average 1.9 grams
of gold a tonne, including a 700,000 high grade zone at 3.7 grams a
tonne, developing a modest-sized mine producing 100,000 to 150,000
ounces a year over an initial seven- to eight-year mine life would
appear straightforward. With any luck, it will be the first step in a
larger operation.
As Niumataiwalu has put it when talking to the Mount Kare landowners of
the present gold resource: ''We don't know if we have the ear, the leg
or the hindquarters, but we are looking for a big pig.''
Niumataiwalu is keen to pursue the ''Melanesian way'' with any
development of the Mount Kare resource - working with local villagers to
ensure they are supportive as the mine plans proceed - to try and avoid
any last minute surprises that could derail the project and stall it
for another 25 years.
The Melanesian way is also getting a workout with Semple for his plans
on Bougainville where, for Rio Tinto, a resumption of mining may not be
simple, since opposition remains deeply entrenched in some quarters.
Last month, senior managers at Bougainville Copper met landowner groups
with a stake in the Panguna mine area for a further round of meetings,
and they remain optimistic of winning and maintaining broad support for a
resumption of operations.
At the same time, the Bougainville government is trying to corral all
the landowner groups to sit at the table to cut a deal with Bougainville
Copper, although it is far from clear what the position of Rio, with
its dominant 70 per cent stake in the copper company, will be to any
proposal to resume mining.
Work to redefine the size of the ore body as a precursor to any mine
development work is under way, and last month the head of Rio's copper
division, Jean-Sebastien Jacques, joined the Bougainville Copper board.
But with an estimated $3 billion price tag, any progress in resuming
mining will be slow and will need more than just the backing of the
central government to get off the ground.
Bougainville Copper is saying nothing publicly at present as it waits
for landowner groups to reach some unity with the Bougainville and
central governments on a resumption of mining - a process that could
happen quickly, or could be several months away, at best.
But the political risk to any large project on Bougainville cannot be
underestimated since the Autonomous Bougainville Government still plans
to hold a referendum on secession by 2020 which, if it were to proceed,
would scuttle any prospects for a resumption of mining any time this
decade, and beyond.
