In the challenging environment facing Papua New Guinea’s mining industry, Highlands Pacific is standing out as a bright spot, after starting its Star Mountain exploration campaign with mining giant Anglo American. Business Advantage PNG talks with Managing Director John Gooding.

Operations at the Ramu nickel mine. Credit: Highlands Pacific.

Junior miner Highlands Pacific Ltd continues to build on its reputation for attracting investment from major companies to advance exploration projects in Papua New Guinea.

The company formed a joint venture partnership earlier this year with one of the industry’s largest, Anglo American plc, to continue the exploration and development of the Star Mountains copper-gold project in West Sepik Province.

John Gooding, Managing Director of Highlands Pacific, believes Anglo American has shown ‘foresight and initiative’ with the Star Mountains investment at a time when many major miners are shelving their exploration plans to cut back on costs.

‘We are very thankful that we have been able to attract a company of the stature of Anglo American, who have recognised the calibre of our exploration ground and the work we have done there in the past,’ Gooding told Business Advantage PNG.

‘It is also wonderful for PNG, where other major companies like Barrick Gold are pulling back a bit. It is great that another major miner is coming in and showing faith in what the Prime Minister (Peter O’Neill) and his team are trying to achieve.’

We are very thankful that we have been able to attract a company of the stature of Anglo American who have recognised the calibre of our exploration ground and the work we have done there in the past.

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Anglo American has agreed to farm-in to Star Mountains with a US$10 million payment and the potential of controlling 80% of the project in the coming years.

The JV partners are already drilling at their first target at Star Mountains as part of a 3000 metre, US$6.5 million exploration campaign.

To increase its ownership of Star Mountains to 51%, Anglo American will spend US$25 million on exploration over the next four years and achieve a JORC-compliant resource of three million tonnes of copper (equivalent). To then advance to 80%, it must complete a bankable feasibility study on the project.

History repeating

The Star Mountains project has the potential to be PNG’s next big mine. Credit: Highlands Pacific.

The agreement at Star Mountains adds to Highlands Pacific’s history of establishing partnerships with larger companies to ensure the future of its projects.

At the Frieda River copper-gold project in West Sepik province, Highlands Pacific owns a 20% interest, with the other 80% now owned by Pan Aust Ltd, which acquired the stake from Glencore plc.

According to Gooding, the recent takeover offer for PanAust by China’s GRAM is an endorsement of the quality of the company’s assets and in particular the Frieda River project’s ‘great potential’ to be the next big mining project in PNG.

PanAust is currently preparing the project for a feasibility study due for completion by the end of 2015.

Despite the Star Mountains and Frieda River achievements, Gooding conceded that attracting larger partners was not always the strategy that Highlands Pacific had envisioned for these projects.

‘Probably our biggest achievement is that we keep finding world-class ore bodies that are so big we need to bring in major partners because we don’t have the financial capacity alone to do them justice,’ Gooding explained.

‘We don’t consciously set out to bring in a partner for our projects. We would actually like to own and operate a significant project generating cashflow. That hasn’t been the case to date, but we will do well out of our projects—they are all company-makers if they come to fruition.’

Broader development

The Ramu nickel mine. Credit: Highlands Pacific.

Highlands Pacific’s portfolio in PNG also features an 8.56% interest in the Ramu nickel-cobalt mine near Madang, its only producing asset.

The Ramu mine is now majority owned by China’s MCC Ramu Nico Ltd and other Chinese investors.

In Milne Bay Province, the company is partnered with Japan’s Sojitz Group in the early-stage Sewa Bay nickel property after the two parties signed a JV agreement in late 2014.

Gooding said Highlands Pacific had survived the global mining downturn through the development of these projects and the market was now starting to see the value of the company’s assets.

‘We are unusual for a company of our size because we have projects at all stages of the development process,’ Gooding said.

Probably our biggest achievement is that we keep finding world-class ore bodies that are so big we need to bring in major partners because we don’t have the financial capacity alone to do them justice.

‘We have projects in exploration, feasibility and in production, and we are also doing some grassroots exploration as well.”

Strategy pays off

Highlands Pacific has attracted new investment in 2015. Credit: Highlands Pacific.

Highlands Pacific’s ability to attract partners has provided benefits for the company so far in 2015, with its share price rising substantially on the Australian Securities Exchange (ASX).

A key player spiking interest in the company has been global commodity trader, Trafigura, which bought almost 50 million shares in the company at a significant premium in March to lift its share in Highlands Pacific to more than 16%.

Trafigura is also a major shareholder in Puma Energy, which entered the PNG market in mid-2014 through the acquisition of InterOil’s downstream assets.

With Highlands Pacific also having a relatively strong cash position, Gooding said the company was on the lookout for growth opportunities, both in PNG and abroad.

‘We would like to bed everything down in PNG first but we would also like to have our own operation. We are looking throughout the Asia-Pacific region at the moment, not just in PNG,’ Gooding said.