Digging deeper: Mineral Resources Authority confident about the future of Papua New Guinea’s mining sector

Welcome,

The global economic crisis triggered by COVID-19 outbreak has increased the urgency for Papua New Guinea to facilitate mining projects, which are the biggest providers of crucial foreign exchange. Business Advantage PNG speaks exclusively PNG’s Mineral Resources Authority about where the sector is heading.

Wafi-Golpu is a joint venture between Newcrest Mining Limited and Harmony Gold Mining Company Limited. Credit: Wafi-Golpu Joint Venture

The lack of an agreement to develop Papau New Guinea’s new gas resources and the country’s urgent need to bring in more foreign exchange has shifted attention again to the country’s mining sector. The Mineral Resources Authority (MRA) is tasked with regulatory approvals on all mining projects, including new leases and the renewal of existing leases.

One issue facing the MRA recently was the review of the special mining lease for Barrick Gold’s giant Porgera gold mine in Enga Province. Prime Minister James Marape announced last week that the government would not renew the lease, following the referral of the application for renewal to the Mining Advisory Council (MAC).

‘We are very confident the country will continue to produce annually about two million ounces of gold, on average.’

‘The question with Porgera, where you have a 30-year history, is that you have what could be loosely labelled as legacy issues, such as claims about environmental issues and resettlement,’ notes Roger Gunson, Division Executive Manager, Regulatory Operations at the MRA, in an interview with Business Advantage PNG conducted before the Prime Minister’s announcement.

‘All of those are currently only claims. None has been proven. Steps have been taken over time to rectify and to increase compensation payments, all of which have been done. But there are still real problems, in particular, the illegal trespassing by unauthorised persons, settlement and illegal harvesting of gold within the exclusive mining zone or pit area. Associated with these have been increasing number of illegal mining, fatalities and lawlessness over the last three years. All that goes as a series of packages to the MAC, which can ask further questions. If some of the legacy issues MAC feel are sufficiently serious, MAC can recommend that they be addressed in the future.’

Prospective mines

The MRA’s Jerry Garry.

The development of the prospective gold and copper mine Wafi-Golpu, a 50-50 joint venture between Newcrest Mining and Harmony Gold, was held up for a year from March 2019 because of a court injunction, notes Gunson. But with the share prices of both companies rising during the COVID-19 crisis, it is not likely they will be subject to capital shortages as has been the case with companies in the LNG and oil sectors.

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Managing Director of the MRA, Jerry Garry, tells Business Advantage PNG that ‘the next step is to carry on’ with processing the application, which should be before the National Executive Council this year. At the same time, the negotiations for benefit sharing between the State, provincial government, local level government and the project joint venture partners will be undertaken.

The other potential big mining project, PanAust’s Frieda River, whose possible start date is further out, faces some significant technical issues, says Garry.

‘There are two issues the state wants to get straightened out before advancing,’ he says. ‘One is the integrated storage facility, a mega-structure that will hold the tailings, waste rock and store water for hydro power.’

‘We believe there are huge ore bodies yet to be discovered.’

Such a facility does not exist anywhere in the world, so there is no precedent to use as a guide, notes Gunson.

‘The state wants to know whether such a structure will have the integrity to withstand the test of time,’ says Garry. ‘Any spillage will ultimately flow into the Sepik River. What are the mitigation measures in the event that there is a failure?

‘It is located in a very seismic area and there are major fault lines running through the area. We want to know if they understand the tectonic movement and how an earthquake would affect it. We have engaged Snowy Mountains Engineering (SMEC) to undertake peer review and give us technical advice.’

Outlook

The usual lead time from discovery to commissioning of a mine in PNG ranges from a minimum of 15 to over 50 years. The urgency to undertake such research today to secure the future of mining industry is very critical. After the development of the last two large scale resources in Frieda and Wafi-Golpu copper-gold project, there will be none left for PNG.

Jerry Garry believes the outlook for the mining sector in the next 30 years is positive, although he expresses concern about the low level of grassroots exploration.

‘We are very confident the country will continue to produce annually about two million ounces of gold, on average,’ he says. ‘We have two existing mines, Porgera and Lihir, that produce close to 1.6 million ounces, which gives that base line.

‘When Wafi-Golpu comes on stream, and with the other smaller mines, we are very confident that the country will continue to produce over two million ounces a year.

PNG copper production (2015–2019) and forecasts for the period 2020–2050. Source: Mineral Resources Authority, 2020

‘In terms of copper production, Ok Tedi is currently PNG’s only copper concentrate producer. In the next three or four years, it is likely to produce about 160,000 tonnes per annum.

‘If we get Wafi-Golpu online, copper production will be increased to about 400,000 tonnes per annum. If Frieda River comes on board, we could get it up to 600,000 tonnes per annum.’

Garry says the MRA is looking at the ‘next generation of wealth’. He says that deposits near the surface in Papua New Guinea have already been discovered, so it is now necessary search for deeper copper-gold ore bodies.

All this will place greater emphasis on the MRA’s other major role – the provision of data and other resources to aid and encourage mining exploration.

‘We believe there are huge ore bodies yet to be discovered,’ states Garry. ‘We will be trialling new innovative geophysical surveys techniques this year to detect those deep-seated hidden treasures to sustain mining in the country.’

Comments

  1. Alex Lalup says

    Very good illustrative update from our good MD for MRA Mr. Jerry Garry on the status of current mines in PNG.
    I was of interest only to ask about the status of Tolukuma Gold Mines Limited. It has been liquidated and put on tender some months back.
    How far have the negotiations gone and how soon are we looking at a new investor in to operate the mine.

  2. Kelly Bele says

    I from porgera and I would like to know more about mindset Papua New Guinea

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