This was published 11 years ago
Miners tap resources the Melanesian way
Exploiting PNG's mineral wealth takes long negotiation and the full co-operation of the local landowners, writes Brian Robins.
By Brian Robins
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.