Papua New Guinea’s approach to mining and resources legislation, currently under review, will be critical to positioning the country for the next upswing in prices, Greg Anderson, Executive Director of the PNG Chamber of Mines and Petroleum, tells Business Advantage PNG.

The PNG Chamber of Mines and Petroleum’s Greg Anderson.

Anderson tells Business Advantage PNG that the country is well placed to attract investment when the cycle turns, but choices made now will have lasting effects.

He says, unlike the similar downturn between 1997 and 2002, ‘this time’ PNG has an established Liquid Natural Gas (LNG) project, which makes the overall resource sectors larger and more significant to the economy. It is thus important, he argues, to have a regulatory regime that is investor-friendly, as well as beneficial to the PNG economy.

‘We do have several undeveloped world class copper and gold prospects.’

‘There is no doubt, despite the gloom, we are still number one for LNG development in terms of attractiveness in the region, if not the world, in terms of cost structures,’ Anderson told Business Advantage PNG. ‘So if anything new is going to be established, it will very likely be in PNG. ’

Prospects good for mining

Anderson believes there are also good long term prospects in the mining sector.

Wafi Camp

‘We do have several undeveloped world class copper and gold prospects. Wafi-Golpu is definitely a world class deposit. The resource contains up to 2 per cent copper and it will last for many decades.

‘These projects have a long lead time, but if the fiscal and policy environment is stable and attractive, PNG will develop some new major projects when the commodity cycle comes back up. It is just a matter of when it happens.

‘Additionally, we have two exciting copper-gold discoveries at Harmony Gold’s Kili Teke prospect and in Highlands Pacific’s Star Mountains tenements.’

For ten years, says Anderson, from 2003-12, PNG ‘finessed’ the commodity cycle upswing with an internationally competitive and stable fiscal and regulatory regime. PNG, as an industry and a resource country, did ‘extremely well’, he says. He believes this highlights the point that the current review of both the Mining Act and Mineral Resources Authority Act should be approached with caution.

‘One example of a robust response to adversity is the Ok Tedi copper-gold mine.’

‘PNG rode that decade of growth all the way from the start because we had the right regime in place. The Chamber sees this as a great success story, an established track record that should be nurtured and improved—(even) making it a little better—so that when commodity prices recover PNG will be in the front rank again.’

Using the down times

Downturns can provide the opportunity to restructure and create greater efficiencies. One example of a robust response to adversity is the Ok Tedi copper-gold mine, says Anderson. Ok Tedi management has announced that the mine has re-opened; it was closed last August because of drought.

‘It is a good story, given the circumstances,’ Anderson told Business Advantage PNG.

‘The overall cost structure has been greatly reduced and everything that is non-core will be outsourced. The whole place will be radically different and the operation will be meaner and slimmer. I hope it will be profitable by the end of the year, even at current prices.

‘Everything is being slowed down. There will be measured progress.’

‘I think that the Ok Tedi Mining Limited (OTML) Board and management were extremely courageous and very decisive. They made a very bold decision to close it up front when the El Nino drought commenced, which was exactly the right thing to do, based on the 1997 experience. And the temporary closure has given management an excellent opportunity to restructure the whole operation, as well as do some major maintenance programs.

‘The good thing is that the employees and the community have accepted it for what it was. They could see that times have changed and that it couldn’t go on like it was. I think it has been very skilfully done.’

Exploration slowing

Anderson paints a picture of an industry that is marking time until circumstances improve. ‘Everything is being slowed down. There will be measured progress.’

Exploration is largely entering a holding pattern, says Anderson. He says mineral exploration investment was slightly up last year due to expenditure at Kili Teke, Star Mountains, Wafi-Golpu, PanAust’s copper-gold prospective resource at Frieda River and Ok Tedi’s Townsville prospect. ‘Those five places are where most of the money went.’

This year, he expects exploration to be weaker. ‘The grassroots exploration is decreasing every year; it will decrease again this year. Even the gross exploration expenditure is likely to decrease this year, too.’