Mining

With more than 15% of total GDP and 50% of export value coming from the mining sector the PNG economy is largely linked to the performance of its mines.

PwC is locally and internationally recognised for its expertise in the mining sector. We act as auditors and tax advisors to the top mining companies in the country.

The benefits of mines for the country is not only limited to government shareholding and direct and indirect taxes. Mines are responsible for massive local infrastructure development which includes improvement in transport, housing, healthcare and education.

The biggest challenge for mines in PNG is to deal with the environmental issues in this pristine country and to address the needs and expectation of landowners.

Current projects

Gold

PNG has 3 of the top 25 Gold producing mines in the world and is ranked 8 as a gold producing country.

Porgera in the highlands of PNG produced 972,000 oz of gold in 2000. Its annual production will decrease as the mine nears its closure in 2004.

Lihir Gold limited produced 606,000 oz in 2000. It has successfully addressed the risks of geothermal heat in its extinct volcano crater and is set to mine gold till 2011 and process low grade stockpiles till 2027.

Other gold mines include Tolukuma and Misima.

Copper

The Ok Tedi, mine is situated in the highlands 8 km from the Indonesian border. It produced 203.1 million tons of copper and 503,000 oz of gold in concentrate. Due to the damage done by tailings to the Fly river system, Ok Tedi is attracting widely published negative criticism. A Worldbank study indicated that in respect of environmental concerns the best approach would be to close the mine; however the social consequences of such a closure for the Western province and the country as a whole would be devastating. The mine is currently in the process of negotiating mine continuation compensation packages with the affected landowner groups. In addition it is discussing its mine closure plan for 2010 with the government.

New Projects

Situated on the Pacific rim of fire PNG can truly be considered as under-explored with huge future mining potential. This potential has not been unleashed due to current low commodity prices and a perceived high country risk.

The current lack of new exploration expenditure has lead to widely published comments on current government and tax legislation that are regarded as barriers to new entrants. The government has in the past endeavoured to obtain industry feedback and where appropriate implement recommendations. We believe that this will create more lucrative opportunities for mining in future.

Ramu Nickle

The proposed world class Ramu project is based on the extraction of low cost nickel and cobalt from a large area of “wet tropical” laterite located in the Madang Province of Papua New Guinea. The deposit is located in the foothills of the Bismark Ranges, with relatively easy access to the coast. The ore will be slurried from the mine site, for a distance of 140km, to a refinery site located at Basamuk Bay on the Rai coast. The finished product will be exported through a new deep water wharf facility, which will be constructed as part of the project’s development. The project is operated and managed by Highlands Pacific (65%) in joint venture with Nord Pacific (35%). The current Joint venture partners are looking for an additional partner before the project will go ahead. It is estimated that the project will increase the value of PNG’s exports by 15%.

Other new projects include Frieda Copper, Morobe Gold, Wafi and Mount Kare.

Previous projects

Bougainville Copper

Bougainville Copper was forced to close in 1989 by an armed rebellion of separatist local land owners. At that time it produced approximately
166 000 tonnes of Copper and 450,000oz of gold per annum.

Although the current peace process indicates a peaceful resolution, chances of the mine reopening are regarded as remote.