Spending on mineral exploration in Papua New Guinea has plummeted in the past five years, according to the country’s Mineral Resources Authority. But juniors such as Canterbury Resources and Adyton Resources believe they have found the way forward.

Canterbury Resources’ exploration program at Bismarck on Manus Island is supported by multinational Rio Tinto. Credit: Canterbury Resources

If exploration is the lifeblood of the mining industry, as is often said, then Papua New Guinea must find a way to encourage more of it.

Mineral exploration spending in PNG averaged K380 million between 2010 and 2019, peaking at K606 million in 2013. But it has plummeted since, averaging just K138 million between 2020 and 2022, and with no signs yet of the recovery seen globally, according to Jerry Garry, Managing Director of the Mineral Resources Authority (MRA).

Speaking at a July 2024 industry conference, Garry acknowledged that negative perceptions about law and order, a lack of geoscientific data, and long turnaround times for licences had all contributed to the decline in spend.

The MRA plans to implement a five-year program to boost exploration, which would include providing access to high-quality geoscientific data and testing new potential geological areas.

Sharing the cost

Another reason for PNG’s low exploration is its high cost, according to Grant Craighead, Managing Director of Canterbury Resources.

The Australian-listed junior has three gold and copper exploration projects in PNG – Ekuti Range and Wamum in Morobe province and Bismarck on Manus Island – as well as projects in Queensland.

PNG’s exploration spend has continued to lag in recent years as global exploration spending has recovered. Sources: MRA; S&P Global Market Intelligence

“The geographical challenges are the greatest difference between Australia and Papua New Guinea. In Queensland, there’s road, rail, power, water, people, equipment – all within an hour’s drive from our deposit,” Craighead tells Business Advantage PNG.

“In PNG, you’ve got zero of those opportunities, which is why everything is three times as costly and three times as slow to achieve. And [therefore], the scale of the deposit you’ve got to find is three times as big.”

This is why there are farm-in joint venture agreements at each of Canterbury’s PNG projects. Rio Tinto, the world’s third-largest mining company by market capitalisation, can earn up to an 80 per cent ownership interest in Bismarck by financing exploration activities, while Syndicate Minerals, a privately owned Australian company, can earn up to a 70 per cent interest in the two Morobe projects.

“Our joint venture partners cover basically 99 per cent of our exploration costs,’” Craighead explains. “As a junior, you virtually can’t afford to operate in PNG unless you use other people’s money.”

Nevertheless, with costs proving such a stumbling block, Craighead says juniors are able to bring more flexibility than majors.

“As a big company, Rio Tinto struggles to operate on the ground in PNG,” Craighead observes. “Whereas Canterbury, a junior staffed almost entirely with local people, has a lot more flexibility, a lot more on-the-ground skills, and is able to work in the operating environment a lot more effectively.”

Islands over Highlands

Adyton Resources, a Toronto-listed junior, has the Fergusson Island gold projects in Milne Bay Province, comprising two advanced-exploration projects, as well as the prospective Feni gold project in New Ireland Province.

In May 2024, it signed a binding agreement with East Vision International Holdings (EVIH), a Singapore-based subsidiary of a Chinese ferro-titanium mining group, which gave EVIH the right to acquire up to a 50 per cent interest in the Fergusson Island project through US$8.5 million in project funding and an additional US$1 million payment to Adyton.

Adyton very deliberately chose PNG’s islands over the Highlands, Managing Director Tim Crossley tells Business Advantage PNG.

“It’s not that we don’t think the Highlands has incredible exploration potential. Porgera, Ok Tedi and Wafi-Golpu were all discovered there,” Crossley acknowledges.

“But to explore in the Highlands is expensive. It’s nearly always helicopter-supported. Further to that, if you develop a project in the Highlands, you’ve got to build roads that will have to traverse through many different villages and landowners to get to your destination.”

The islands provide “a much easier development pathway,” he says. “You land a barge on the beach with all your equipment, walk it off and start drilling.

“Further out, you’ve got a fantastic blueprint of development, with Lihir and Simberi on island locations.”

This article was first published in the Business Advantage PNG Mining & Energy Special Edition 2024/25, which was published in October 2024.