PNG is richly endowed with deposits of gold, silver and copper. Much of it remains untouched but new incentives are attracting outside investment to develop the industry
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he
mining industry plays a pivotal role in Papua New Guinea’s economy,
accounting for three-quarters of the country’s export income and
almost a third of its GDP. Rich in mineral resources and petroleum,
PNG has been described as “a mountain of gold floating on a sea
of oil”.
As
in the oil sector, tax incentives have been brought in as part of an
aggressive campaign to attract international companies with the necessary
capital, expertise and technology. The effect, too, has been the same
– significant growth in exploration raising hopes of new discoveries
and increased production.
Spending on mining exploration almost doubled in 2003 to more than K60
million (£10.5 million) compared to K33 million (£5.7 million)
in 2002. In 2002, only five mining exploration licences were issued
while 14 new licences were issued in the first 10 months of 2003.
A
gold exporter since the 1930s, PNG is the world’s 11th largest
producer. It also boasts the largest known supply of low-grade copper,
all of which is exported to Western Europe and Japan.
Four world-class, open pit mines are currently in operation: Ok Tedi
and Porgera on the mainland, and Lihir and Misima at island locations.
Ok Tedi, the largest mine in PNG, is ranked the eighth largest copper
mine and twentieth largest gold mine in the world. The Lihir gold mine
has one of the world’s largest known undeveloped gold deposits.
Developing the industry poses a number of challenges. Some of the most
valuable resources are to be found in the most inaccessible places.
Ok Tedi, Porgera and the medium-sized Tolukuma mine are all in remote
mountainous terrain, while the Lihir mine is located within the rim
of an extinct volcano.
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According
to Minister for Mining Sam Akoitai,
only a fraction of the country’s gold and copper has been exploited.
“So far in PNG, we have mined perhaps one third of the resources
that have already been discovered,” he says.
The Minister believes the industry has a bright future now that the
government has created a more favourable climate for investors and is
promoting the industry abroad. “When we came to power there was
a decline in exploration and production. Since we have provided the
incentives there has been a good response.”
The
process of developing PNG’s full potential for mining is being
backed by the European Union, which is contributing to the creation
of a new geological map of PNG. “With the assistance of the EU,
we are conducting airborne surveys in parts of mainland PNG, where there
has been no previous exploration,” says Mr Akoitai.
“We know we have approximately 3,000 tonnes of gold, 3,000 tonnes
of silver and 15 million tonnes of copper. These figures will increase
by the time we have completed the survey.”
Full production at a major new gold mine at Kainantu in the Eastern Highlands province is expected to be under way early in 2005. The £21 million project by the Australian company Highlands Pacific is the first major mine development since construction started on the Lihir gold mine eight years ago.
| Production levels have risen dramatically at the Tolukuma gold and silver mine |
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Other
gold mining projects are awaiting development, including the Simberi
gold project in New Ireland Province and Ramu nickel project in Madang
Province. The latter, fully licensed and under development by Highlands
Pacific and Oil Search, has been seeking a major international partner.
Tolukuma Gold Mines, owned by South African giant Durban
Roodepoort Deep Ltd. (DRD), operates an underground gold mine in
Central Province, 60 miles north of Port Moresby. Since acquiring the
mine from an Australian firm in 2000, the company has increased production
dramatically.
Designed
to produce 6,000 ounces of gold and around 150,000 ounces of silver
per annum, the mine was in the doldrums under the former ownership.
Since DRD moved in, production levels have increased dramatically and
the mine has become the most profitable in the DRD group and its biggest
generator of cash.
“We drew up a new business plan and within two months we were making
a profit,” explains Richard Johnson,
DRD’s Divisional Director for Australasia.
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He says the success of the mine demonstrates that it is not only very large companies that can do business in PNG’s mining sector. “We are a small mine, compared to others, and this forces us to work closely with the people here. Local ownership and having confidence in the locals makes us competitive.
“Other
mining operations in PNG have required very large sums of capital and
could only be developed by large international companies with huge financial
resources. We are showing that it can be done on a much smaller scale.”
Mr Johnson feels the government is providing the kind of backing the
industry needs. “The government is very keen to attract foreign
investment and is very supportive of companies such as DRD coming to
PNG. Mining legislation is largely based on Australian law, so mining
tenure has been demonstrated to be secure.”
DRD recently acquired Oil Search Limited’s 20 percent stake in the Porgera mine, which is 75 percent owned and operated by Placer Dome, for £40 million.
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