PNG miners face "serious pressure"

Source: PNG Industry News

SERIOUS issues such as project slowdowns, exploration downturns and workforce reductions are looming as a threat to the PNG mining industry, companies have been warned.

This year’s Australia Papua New Guinea Business Forum had the theme of Opportunities Beyond the Boom, yet delegates were painted a stark picture prompted by a drop in commodity prices.

PNG Chamber of Mines and Petroleum executive director Greg Anderson told delegates that serious pressure had been put on PNG-focused mining companies.

“We’ve had a decade of robust times when the industry went through a marked period of growth and we opened two projects,” Anderson said.

“That all finished when commodity prices collapsed in late 2011 when we saw a 30-35% drop in gold and copper.

“This put very serious pressures on our industry [resulting in] project slowdowns, exploration downturns and some workforce reductions.

“The projects have all had to go into serious self-analysis with a major focus on productivity, optimisation and cost reduction with a parallel reduction in taxes, royalties and dividends.”

Anderson said that since the commodities crash, PNG had lost an array of majors including Vale and Newmont, while others such as Barrick Gold and Newcrest Mining had pulled out of exploration joint ventures with junior companies.

“Many of the junior companies are in a very serious stress mode and unable to raise any funds on the market,” he added.

“They are literally dormant and unable to meet their exploration commitments.

“Some of these companies have a share price you can hardly count and their market caps are dreadful.

“Unless these companies are able to raise significant finance in a very short time, there’s no way possible they’ll be able to continue servicing the number of tenements they have – which all have a minimum annual expenditure commitment per block.

“This means we’re going to have a drastic ongoing reduction in the number of tenements.”

Anderson said the chamber was hopeful that the government would make a decision on Ok Tedi’s 11-year mine life extension by September.

And he flagged the Stanley gas condensate project as a very real power option for the North Fly Region which would significantly reduce diesel usage and costs.

Issues with illegal mining at Barrick Gold’s Porgera and significant costs pressures at Newcrest Mining’s Lihir mine were also highlighted at the conference.

On a more positive note, he said the joint venture of Newcrest Mining and Harmony Gold had done a “fabulous job” at Hidden Valley mine, reducing costs from more than $A2000 an ounce to $1200 range.

He also said St Barbara’s Simberi project had also faced very significant cost problems but was hoped to be cash flow positive by December.

Turning to Nautilus Minerals’ Solwara-1 project, Anderson said PNG would be world-leaders in ocean floor mining.

“There has been quite a lot of criticism of this project, but I think it’s something we should be proud of,” he continued.

“It will be with us and we’re going to lead the world. This is good news.”