July 2019 - F.E.S. TANKS

Mining in Papua New Guinea: New Horizons for 2019

Mining in Papua New Guinea: New Horizons for 2019

It’s been an interesting year for the Papua New Guinea mining industry. A leadership shakeup, coupled with looming mining law changes, has given the country a lot to celebrate.

Mining and petroleum is an integral contributor to Papua New Guinea’s (PNG’s) economy.

The region is seriously jam-packed full of resources; copper, gold, nickel, cobalt, LNG and more.
But, despite this resource potential, it’s faced many challenges over the years, including illegal mining and a civil war between 1988 and 1998 sparked by mining tensions.

PNG has also been victim to a number of environmental disasters, including a devastating earthquake in February 2018, which caused disruptions to the country’s biggest mines, Ok Tedi and Porgera.

However, this hasn’t dampened the spirits of producers in the region, with mines bouncing back from troubles, and a wave of new projects on the horizon signalling good times to come.

Papua New Guinea mining benefits

In February, the World Bank released a report forecasting new large-scale resources projects will boost Papua New Guinea’s Gross Domestic Product (GDP) to 5% this year.

The PNG Chamber of Mines and Petroleum said a rebound in the economy was great news, particularly at a time when the country faced challenges with its foreign reserve.

“The World Bank Report demonstrates that the mining and petroleum sector remain absolutely critical for PNG jobs, the economy, and all the social benefits that flow from this,” it stated.

In mid-June, the PNG Chamber of Mines and Petroleum held its 35th Australia Papua New Guinea Business Forum in Port Moresby, which also put a spotlight on the strength of PNG’s mining and petroleum industry.

Chamber president Gerea Aopi said the resources sector is a key economic driver, contributing 26% of PNG’s GDP and 80% of the nation’s export revenue.

“The sector also provides more than 20,000 jobs to Papua New Guineans, whilst 30,000 more are employed in landowner businesses, and other PNG businesses that support the industry,” Mr Aopi said.

“Resource companies invest heavily in establishing, and providing necessary governance and administrative support to landowner companies which serve to ensure long term sustainability.”

Papua New Guinea Chamber of Mines and Petroleum president Gerea Aopi at the June conference. — PNG Chamber of Mines and Petroleum president Gerea Aopi at the June conference. Image: PNG Chamber of Mines and Petroleum.

New PNG mining laws proposed

The conference was held just weeks after long-running PNG prime minister Peter O’Neill resigned, and was replaced by former finance minister James Marape.

New prime minister Mr Marape has pledged to “tweak and turn” laws related to mining to improve economic conditions for PNG citizens living in poverty.

“At the moment, our resource laws are outdated … we will look into maximising gain from what God has given this country from our natural resources,” Mr Marape said in his first address to parliament as prime minister.

However, Mr Marabe said major reform to the laws would not take effect for years, and urged resources companies not to worry.

“While I’m speaking on natural resources, many of our corporate citizens amidst us will feel a little bit doubtful or will feel a little bit intimidated,” he said. “I’m looking at 2025 in which we will migrate to a new legislative framework.”

PNG Chamber of Mines and Petroleum president Mr Aobi applauded the new Government’s desire to amend resource laws.

“We share this desire and will support the development of legislation that encourage investments and provides a better outcome for PNG,” Mr Aobi said.

“We want to work together with Government and all stakeholders to make this happen. The vision shared by many, including our prime minister to grow PNG’s wealth is supported by us. We want to see a stronger Papua New Guinea, a stronger economy, and a bright future for our country.”

Operating Mines in Papua New Guinea

With a positive outlook ahead for the PNG mining industry, let’s take a look at the country’s key operating mines and latest developments.

Ok Tedi

State-owned mine Ok Tedi is an open-pit copper, gold and silver mine in the Western province in PNG, and the country’s oldest operating mine. In recent years, the team developed a revised mining strategy that has enabled it to access higher grade ore and extend mine life to 2025.

Porgera

Porgera is an open pit and underground gold project, about 600km north-west of Port Moresby. The project is owned by Barrick Gold (47.5%), Zijin (47.5%) and the Enga provincial government (5%). In June, the joint venture met with new prime minister James Marape about extending the current special mining lease, set to expire in August, for another 20 years.

Hidden Valley

About 210km northwest of Port Moresby, Hidden Valley is an open pit gold and silver mine in the Morobe province in Papua New Guinea. In 2016, South African miner Harmony Gold became the sole owner of the project, after its JV partner Newcrest sold its 50% interest.

Lihir

Newcrest’s Lihir mine is one of the largest gold mines in PNG, and is located on Aniolam Island, 900km north-west of Port Moresby. The project has an ore reserve of 24 million ounces and mineral resource of 50 million ounces. In June, the company deployed a private LTE network at the project to improve communications onsite.

Kainantu

K92 Mining’s Kainantu gold project is in the Eastern Highlands province of PNG. In Q2 2019 the mine produced 18,980oz of gold, 261,800 pounds copper and 6894oz silver, with production 25% above forecasts. Over the coming months, K92 is advancing a plant expansion to double capacity to 400,000 tonnes per annum and increase annual production to an average of 120,000 ounces of gold equivalent.

Simberi

St Barbara’s Simberi gold project is in New Ireland – the easternmost province of PNG. The project comprises various open cut mines, and has a mine life out to 2021. However, there is the prospect of extending mine life should a 1.5 million tonnes per annum (mtpa) sulphide circuit be developed.

Ramu

Ramu NiCo Management (MCC) operates the $US2.1 billion Ramu nickel-cobalt project in Madang. In 2018, the project faced pressures on the sales front, only selling about 75% of nickel production, which its executive team put down to a global economic downturn and price plummet. This year, the company plans to improve efficiencies, boost revenue and be adaptable to the changing market environment.

Edie Creek

Niuminco operates the Edie Creek mine in PNG, and also owns exploration projects, May River and Bolobip. Over the last year, the company has struggled with its finances, but in May, entered into a $500,000 funding agreement to put towards general working purposes.

New Papua New Guinea Mining Projects

Wafi-Golpu

Wafi-Golpu is a world-class copper-gold project, which, if approved, could be the largest and most complex underground mine in PNG. The project is a 50:50 joint venture between Newcrest and Harmony Gold. If developed, it could provide 2500 direct jobs during construction and 850 ongoing operational jobs for an estimated 28-years. The project is advanced, however still needs to obtain a special mining licence before construction can begin.

Frieda River

PanAust’s undeveloped Frieda River project is also highly anticipated. In December 2018, the company announced the Sepik Development project, a new nation-building development pathway for Frieda River, which focuses on the development of shared-use infrastructure that will support a hydroelectric facility and mine operation.

Ekuti Range, Ipi River, Bismarck projects

Canterbury Resources has a suite of copper-gold exploration projects in PNG, including Ekuti Range, Ipi River and Bismarck. The projects are early-stage, however, with Rio Tinto managing and sole funding exploration at Canterbury’s Bismarck project on Manus Island, it’s all looking promising.

Woodlark

In November 2018, Geopacific released a Definitive Feasibility Study for its Woodlark gold project in PNG. The project, once developed, is expected to produce 100,000 ounces of gold annually for its first five years. Over the coming months, Geopacific will be advancing finance solutions.

Misima Island

Junior miner Kingston Resources is also pursuing shuttered gold mine Misima Island, which closed in 2004. Since acquiring a 70% interest in the project in 2018, Kingston has identified five key exploration targets for follow-up drilling.

Solwara 1

Canadian company Nautilus Minerals is planning to develop PNG’s first deep sea mine, Solwara 1. The company is planning to extract high-grade Seafloor Massive Sulphide (SMS) deposits of copper, gold, zinc, and silver in 1600 metres of water. The project still needs to obtain approvals.

Central Cement and Lime, Orokolo Bay and Amazon Bay

Mayur Resources has industrial and mineral sands exploration projects in PNG. In July, the company announced it had lodged a submission for its Central Cement and Lime project, with only a few steps ahead before construction can begin.

Simuku

Coppermoly is advancing the Simuku copper molybdenum project in the West New Britain province of PNG. In July, it completed a Ground IP Survey, which spanned 21km of ground. The company has also recently renewed an exploration license at its Nakru project in the region.

How F.E.S. TANKS can help Papua New Guinea miners

If you’ve got this far, we’re sure you can agree there’s a lot happening in the PNG mining space at the moment.

We’ve got an exciting announcement of our own too.

This year, we’ll be launching our self-bunded fuel tanks into PNG, servicing all industries in the country, through our division:

Self Bunded Tanks in Papua New Guinea

Power reliability is key, and at F.E.S. TANKS we can help with all your diesel fuel storage needs.

Our self-bunded tanks come in a variety of sizes ranging from 1,000l to 110,000l, meaning there’s a fuel storage option to suit all project sizes.

If you’re involved in the PNG mining industry, drop a comment below, we’d love to connect.

Mining Papua New Guinea

Mining in Africa: A Bright Future

After a period of volatility, commodity downturn, upward cost pressures and unstable politics exacerbating sovereign risk, demand is picking up again for African mining projects, with investors, producers and suppliers (like us) in the box seat.

Mining activity in Africa is ramping up at warp speed.

You see, the continent itself produces more than 60 metal and mineral products, including high-grade gold, bauxite, manganese, coal, iron ore, cobalt, uranium, platinum, rare earths, copper to diamonds.

It’s a treasure trove for mineral extraction. Yet for many years, concerns around regional stability prevented companies from taking that much-needed ‘leap of faith’ and pouring capital into the region.

But, with political tensions easing in parts and demand for commodities on the rise, more projects are transitioning from exploration to production.

Opportunities for African mining

At the Mining Indaba conference held in Cape Town in February, Global Business Reports launched a lengthy white paper outlining investment opportunities in Africa for 2019.

“Overwhelmingly, our research conducted throughout 2018 suggests an air of cautious optimism heading into 2019,” Global Business Reports stated.

“Paradoxically, that stability has been driven by a broad trend across the continent towards diversification away from the mining industry into sectors such as agriculture, power generation and manufacturing.”

Global Business Reports said in the Central African copper belt, the DRC stole the spotlight and “will continue to demand the world’s attention in 2019” as skyrocketing cobalt prices and ongoing political chaos ensure the perfect storm.

“Throughout Southern Africa – from Botswana’s depleting diamond reserves to Zimbabwe’s well-established chromium deposits and Zambia’s deepening copper mines – maturing jurisdictions are more increasingly focused on the task of achieving local content and beneficiation,” it said.

“Conversely, in West Africa, the region’s underexplored mineral resource potential makes the area an attractive proposition for investors from across the globe and more nascent jurisdictions like Burkina Faso and Côte d’Ivoire are eager to incentivize foreign investment.”

Resolute Gold - Syama Gold Mine Mali — Image: Resolute Mining

In Australia alone, there were more than 200 companies investing in Africa, with about 700 projects in 35 countries. Of these companies, most of them were based in South Africa, Namibia, Tanzania, Zambia and Burkina Faso.

And as the world transitions towards electric vehicles, all the associated materials were trending, from lithium, graphite, nickel to copper.

“80% of the world’s lithium is solution-based and comes from Bolivia, but more and more discoveries are being made in Africa of hard-rock type lithium,” WorleyParsons RSA chief executive Denver Dreyer said.

“Thermal coal is still interesting for South Africa, because of our ongoing reliance on coal and the need to replace the depleting coalfields with higher quality coal. Additionally, 80% of Africa’s manganese is found in South Africa and it is of good quality.”

In its Future of Mining in Africa: Navigating a Revolution report, Deloitte said in the midst of all this growth, the fourth industrial revolution had emerged, presenting further opportunities and challenges for African mining projects.

“Regulatory changes and societal impacts require mines to become not merely compliant, but to adopt smarter ways of deriving value from regulation, while ensuring mutual benefit to surrounding communities and environments in which they operate. New skills, a changing workforce, organisational restructuring and adoption of new technologies are all important to navigate in this era,” Deloitte stated.

New Mining Projects in Africa

So there’s a brief rundown on the opportunities for mining in Africa. Let’s now take a look at some of the exciting new developments.

Yaouré | Perseus Mining (ASX: PRU) began construction at its third African project, Yaouré, in May. The $US265 million project is in Côte d’Ivoire and once operational in 2020, will produce 215,000 ounces of gold.
Syama | In April, the Mali Government granted Resolute Mining (ASX: RSG) a 10-year extension of the Syama mining permit to enforce the provisions of a new Mining Convention Agreement. The new agreement guarantees an income tax rate of 25%; a 10% reduction on the previous rate of 35%.

KCC & Mutanda | Following some setbacks at its DRC operations late last year, Glencore (LSE: GLEN) has entered into a long-term revolving agreement for the supply of cobalt hydroxide (cobalt) to Umicore’s battery materials value chain. The agreement underpins continued operations at the DRC cobalt projects.
Obuasi | Earlier this year AngloGold Ashanti (ASX: AGG) resumed operations at its mothballed Obuasi gold mine in Ghana. In June, the miner announced it would recruit up to 2500 workers to ramp up the mine to full operations.
Fekola | Canadian miner B2Gold (TSX: BTO) is assessing a $US50 million expansion of its Fekola gold project in Mali. The potential expansion would see it increase annual processing capacity to a baseline of 7.5 million tonnes per annum (mtpa).
Boikarabelo | Resource Generation (ASX: RES) is a step closer to advancing its $550 million Boikarabelo coal mine in South Africa, after receiving formal participation (credit approval) from the second member of a proposed three-party lending syndicate in June. This should facilitate the completion of the project finance.

Boikarabelo Epanko project for resolute mining — Image: Kibaran Resources

Epanko | Perth-based Kibaran Resources’ (ASX: KNL) $US88 million graphite project is development-ready after receiving in-principle approval in late May from the Tanzanian Government for its proposed debt financing arrangements. Construction is expected to begin in late 2019.
Kola | Kore Potash (LON: KP2) has secured $US13 million to continue development of its Kola potash project in the Democratic Republic of Congo. Construction is planned to begin in late 2019.
Boffa | Aluminium Corp of China (Chalco) began construction at its $US500 million Boffa bauxite mine in Guinea late last year. The company planned to begin production in late 2019, with the first stage producing 12 million tonnes of bauxite per annum.
Segilola | Thor Explorations (TSX: THX) is developing the high-grade Segilola gold project in Osun, Nigeria. The project is considered the most advanced gold project in Nigeria with an EPC contract now locked in.

Power challenges facing African mines

Given the remote location of many of these projects, companies were still hitting roadblocks when it came to accessing reliable power.

“Some of the biggest challenges for power projects when they reach the point of bankability is the purchaser or offtaker,” Andrew Herscowitz, co-ordinator at Power Africa, an arm of the United States Agency for International Development (USAID), told Global Business Reports.

“A recent study indicated that only two of 37 utilities in sub-Saharan Africa were actually financially solvent… The question is not whether there is enough flow across the continent – they are pretty much on par with anticipated demand for power in most countries. The power will simply not reach industry or the local population if we cannot improve the financial viability of utilities, build out the distribution network and set up transmission lines.”

Renewable energy projects were being considered, however, for now, mining companies in Africa were generally looking at hybrid energy systems, incorporating a traditional power source, like diesel fuel, and renewables.

“If the mine implements a hybrid solution, it is very important to have the right capacity installed to handle their consumption needs. At this stage, mining companies cannot afford to rely on the weather for their power supply and thus hybrid solutions are currently the best option,” Wärtsilä vice president for Africa Mamadou Goumble said.

Its clear diesel fuel will continue to be a reliable power source for African mines, and self bunded tanks to store fuel in bulk (securely) on site are in high demand.

Self Bunded Tanks for African mining

At F.E.S. TANKS, we’re excited to announce we’re launching our self bunded diesel tanks into the African market this year, and will be servicing all industries through our new divisions:

F.E.S. TANKS NIGERIA

We look forward to working with mining companies in Africa to help them with their bulk fuel storage needs, providing secure, safe tanks so issues like fuel theft and power outages can be a thing of the past.

If you’re a mining company that’s looking for secure power at your project in Africa, we’d love to hear from you.

Africa