Sarimu Kanu, Managing Director of state-owned miner Kumul Minerals Holdings, gives an update on the progress of the Wafi-Golpu mine project to Business Advantage PNG, and outlines the company’s strategy to consolidate some of Papua New Guinea’s smaller mining projects.

Kumul Minerals Holdings’ Sarimu Kanu. Credit: BAI

Fresh off the reopening of the Porgera gold mine, state-owned Kumul Mineral Holdings Limited (KMHL) is now focusing on the development of another project of national importance: the Wafi-Golpu copper-gold mine in Morobe province.

KMHL’s Managing Director Sarimu Kanu tells Business Advantage PNG that he is confident the joint venture partners – Newmont Corporation and Harmony Gold – will sign a mine development contract by mid-2024 and that a special mining lease will follow soon after.

The 2023 memorandum of understanding between the Papua New Guinea government and the developers will see PNG exercise its full 30 per cent state equity participation option in the project. As the state’s nominee, KMHL will hold 20 per cent, while local participants will share the remaining 10 per cent.

Kanu says Newmont’s recent takeover of Newcrest Mining – which made Newmont the world’s biggest gold miner – was unlikely to cause delays to Wafi-Golpu.

“[Newmont chief executive] Tom Palmer has told us they are committed to Lihir [the other PNG asset Newmont acquired from Newcrest] and Wafi,” Kanu says.

At Wafi-Golpu, the parties are now focused on completing the mine development contract.

“We are currently in the last stages of negotiations with the joint venture partners, and we hope to conclude that very shortly,” says Kanu.

“This is a quality deposit, and it will be well received by a lot of financial institutions”

The technical assessment phase of the Special Mining Lease process is also underway and “is well ahead of schedule.”

Kanu confirmed that KMHL will need to raise its share of the financing for the project, which carries an initial capital cost of US$2.825 billion (according to an updated feasibility study published in 2018).

Once in production, Wafi-Golpu is expected to deliver 161,000 tonnes of copper and 266,000 ounces (oz) of gold per year across a 28-year mine life.

Infrastructure opportunities

The development of Wafi-Golpu should see KMHL continue generating substantial revenues well after its current major sources of revenue, the Porgera and Ok Tedi mines, reach end of production around the year 2040. The same applies to Frieda River, a proposed US$6 billion project in East Sepik province led by Chinese state-owned company PanAust Mining.

The potential to build supporting infrastructure that benefits local communities is equally as important as the economic benefits, in Kanu’s opinion.

Recalling his time as General Manager of the Ramu nickel-cobalt mine in Madang province, he said the state missed an opportunity to build infrastructure tied to the mine – “even though it was stated in the mine development contract.”

“There was an opportunity for the state to finance the port and then lease it back to the project, and then to finance the power station and sell electricity back to the project,” he says.

“We as industry people see these opportunities. So, we are trying to push this with Wafi, and then with Frieda.”

In addition to local benefits, Kanu said the development of associated infrastructure would make the projects more attractive to potential multilateral investors such as the International Finance Corporation.

“We are in the phase right now of gauging the market’s appetite for financing a project like Wafi. This is a quality deposit, and it will be well received by a lot of financial institutions,” Kanu says.

“Being a national mining company, we will drive shared-use infrastructure and big things like human capacity-building, training and so on.”

As a result, Kanu reveals, “we are talking with the likes of the IFC and [its parent organisation] the World Bank about the role they can play in this. They can see that there is this supporting infrastructure, that there is potential for a hydro energy source, and then you have these roads and other infrastructure.”

In Wafi-Golpu’s case, the 2018 feasibility study proposed a 140 MW power plant for baseload power. At Frieda River, PanAust’s development plan calls for construction of an integrated 490 MW hydroelectric power plant and tailings storage facility. The hydroelectric plant would supply the mine and generate excess power which would be sold and distributed to local communities.

“There’s a huge potential for [the] Sepik [region] to be a major supplier of food for our region, and especially to Australia and the Asian markets,” Kanu says.

“But we’ve got to have the infrastructure for that, and the success of the infrastructure will be underpinned by the mine itself.”

National interest projects

Looking further afield, Kanu says “national interest projects” – defined by KMHL as smaller projects with a projected internal rate of return of 8 to 12 per cent – would form an important component of the state-owned miner’s long-term strategy.

In Kanu’s words, these projects will be driven by a “regional consolidation strategy” of economising prospects that are close to each other but which may not be economically viable on their own. He notes the strategy has similarities to what sister company Kumul Petroleum Holdings is planning with PNG’s “stranded” gas fields.

Aerial view of the Wafi-Golpu Camp. Credit: BAI

KMHL’s first priority is a Milne Bay consolidation strategy, which involves the planned construction of a central processing plant on Misima Island to serve up to six oxide gold projects. These could include two advanced-stage gold projects: Kingston Resources’ project on Misima Island, which has 3.6 million oz in gold resources; and Geopacific Resources’ project on nearby Woodlark Island, which has 1.6 million oz in gold resources.

KMHL will aim to acquire an operating majority in these projects to ensure both socially and environmentally responsible practices. Kanu confirmed that KMHL was “already in talks” with both Kingston Resources and Geopacific Resources about acquiring their assets.

By consolidating the projects around a central processing facility, Kanu observes, KMHL would reduce the unit cost of production for each project.

Although in a separate category to larger-scale projects such as Ok Tedi, Porgera and Wafi-Golpu, he believes these smaller projects can also still provide enormous benefits to PNG’s developing economy.

“Being a national mining company, we will drive shared-use infrastructure and big things like human capacity-building, training and so on.”

The Wafi-Golpu project: key figures

C1 cost copper production: US$0.26/lb (lowest decile of producers)
Initial capital expenditure: ~US$2.8 billion
Life of Mine capital expenditure: ~US$5.4 billion
Net present value: ~US$2.6 billion
Internal rate of return: ~18.2 per cent
Life of Mine: ~28 years
First ore expected: ~4.75 years from grant of Special Mining Lease (SML)

Source: updated feasibility study by Newcrest Mining, 2018

Sarimu Kanu will be speaking at the 2024 Business Advantage PNG Investment Conference, taking place in Brisbane on 12 and 13 August this year. Click here for further details.