Papua New Guinea mining rates ahead of several Australian states for attractiveness

Research by the Fraser Institute shows that Papua New Guinea rates ahead of several Australian states for attractiveness for mining investment. Gavin Wendt, Founding Director of resource analyst Minelife, says statements from Kumul Mineral Holdings’ Chairman Peter Graham that it will invest in upcoming projects are also a positive for foreign investors.

Fraser Institute’s Investment Attractiveness Index. Source: Fraser Institute

A recent Fraser Institute survey ranked PNG ahead of Australia’s two most populous states, New South Wales and Victoria, indicating PNG is still viewed positively as an investment destination by the global mining industry.

‘There are certainly opportunities [in PNG], but companies always look for much bigger, higher grade, more commercial projects to justify the risks of going to PNG,’ observes Wendt.

‘In the last five-to-10 years, the political situation has settled down.’

Wendt says that mining projects in PNG ‘are not exceptionally difficult’ compared with many other countries.

‘[In Australia] we have certainly done a great job of blotting our own copybook in recent times in terms of a number of the Australian states.

‘Kumul Minerals has the right, if not the obligation, to invest up to 30 per cent equity.’

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‘No matter where you go in the world, governments these days are more unpredictable in terms of the legislative framework—and it is that legislative framework that is probably the most concerning thing.

‘There is constant pressure on governments.’

Equity

Minelife’s Gavin Wendt. Source: Minelife

According to Peter Graham, Chairman and Independent Director of Kumul Minerals Holdings (KMH), the entity that holds mining assets on behalf of the state, KMH will be looking to make some big plays.

Speaking in London, Graham outlined a strategy of potentially taking large stakes in proposed new projects.

‘We are preparing to invest in some of the more attractive mining investments that we see coming up: most notably, Wafi Golpu and possibly Frieda River as well.

‘Kumul Minerals has the right, if not the obligation, to invest up to 30 per cent equity … (based) on the payment of past costs and obviously a share of future costs in project development.

‘They are world-class resources and they will certainly stand on their merits.’

‘I think companies always like to see government involvement in projects and it is probably better to have them involved right from the start.’

Wendt believes the market looks favourably on government involvement in projects.

‘I think companies always like to see government involvement in projects and it is probably better to have them involved right from the start.

‘So long as it is done on commercial terms. If the costs are shared on a reasonable basis, it advantages the company.’

Debate

Wendt adds that there is little evidence that the recent debate about a revised Mining Act is adversely affecting the share prices of listed miners, suggesting the market is not overly concerned.

‘Highlands Pacific’s (share price) came off a little bit, but I don’t know if you can attribute it to this particular development,’ says Wendt.

‘It has had a very strong run. It could just be a broader market trend in terms of the resource sector.’

‘It is difficult sometimes to look at the share price and correlate the impact of how seriously the market is taking this sort of talk.’

Wendt believes if the market thought the risks had substantially risen ‘we would probably have seen more significant (share price) falls in all the companies involved.’

Comments

  1. Johnson James says:

    PNG head of Tasmania and Victoria.
    They hardly have any mines in those States.

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