While Solomon Islands lies in the mineral-rich Pacific Ring of Fire, its mining sector has yet to mirror the success of Papua New Guinea, the region’s minerals powerhouse. But the obstacles are being removed.

Gold is not the only mineral found in the Solomons: copper, nickel and silver are prevalent too. Credit: Allied Gold

Mining in the Solomon Islands reached its nadir in May 2000, when its only gold mine, Gold Ridge on Guadalcanal, was closed due to civil unrest. The mine, 40 km south-west of the capital Honiara, was reportedly making up to 30% of the country’s GDP at the time.

Following the return of social and economic stability to the islands from 2003, plans were made to re-open the mine. Its 2009 acquisition by London, Toronto and ASX-listed Allied Gold (which also operates the Simberi gold mine in neighbouring Papua New Guinea) and the recommencement of gold production in March 2011 are the clearest indications that the country’s minerals sector is well and truly back on its feet.

The re-opening of Allied Gold’s Gold Ridge mine in March 2011 was a major milestone for the Solomons. Credit: Allied Gold

Gold Ridge opening dividend

The re-opening has had an immediate financial impact. The World Bank estimates Gold Ridge increased the Solomons’ GDP by 2% in 2011.

Following its acquisition of Gold Ridge, Allied Gold announced an investment program worth US$155 million to expand the mine to a capacity of 110,000 ounces per annum, with current reserves which will see the open pit mine operate for at least 10 years. The $150 million construction and refurbishment was completed in March 2011 and all four mining pits will be fully operational during 2012. Exploration near the mine will pick up in 2012 and 2013.

Attractions for miners

At a business forum in Brisbane, Australia, in October 2011, an Allied Gold spokesperson noted the attractions of investing in a resources project in the Solomons: its proximity and ties to Australia and New Zealand, the social stability enabled by the Regional Assistance Mission to Solomon Islands (RAMSI), clear rules for miners, the support of international aid organisations, pre-existing mining experience and a supportive and welcoming Government and population.

Field grows wider

Allied Gold is not the only company actively prospecting for gold in the Solomons. London-listed Solomon Gold is prospecting in five tenements on Guadalcanal close to Gold Ridge as part of a joint venture with the world’s largest gold producer, Newmont Mining. Testing and drilling are continuing after discoveries of gold, copper and silver. There are encouraging results from exploration activity on Fauro Island in the far north of the Solomons.

Meanwhile, South Africa’s AngloGold Ashanti is exploring for gold and copper on New Georgia Island and Vangunu Island in partnership with Canadian exploration company XDM Resources.

XDM is also prospecting on Vella Lavella and New Georgia under its own steam.

Nickel is found in large quantities across Melanesia, and both Japan’s Sumitomo Metal Mining and Australia’s Axiom are currently looking at nickel projects in the Solomons.

The country’s minerals sector is well and truly back on its feet.

Gold is not the only mineral found in the Sumitomo’s activities include exploration on Isabel Island and the smaller Choiseul Island. Sumitomo will invest an additional US$26 million in its nickel projects in 2012. Should they eventually mgo into production, they would involve not only nickel mining but also the construction of a 30,000 tonne per annum nickel ore processing facility. This would mean not only revenue for the Government and landowners, but also badly needed local jobs.

Meanwhile, Axiom is examining what it describes as ‘world class’ nickel laterite deposits in two tenements on Isabel.

The seas surrounding the Solomons also offer long-term potential for mineral extraction. Canada-based Nautilus Minerals, currently pioneering undersea mining in the Bismarck Sea in neighbouring Papua New Guinea, has 25 exploration tenements in the Solomon Sea, part of a portfolio that stretches across the Pacific.

An industry matures

Given the increasing number of mining companies operating in the Solomons, focus has shifted to the enabling environment for mining.

The Mining Act is set to be reviewed during 2012, with the World Bank supporting improved governance in the mining sector through review of policy and legislation.

Steps are also well advanced towards establishing a Solomon Islands Chamber of Mineral Development.

‘It’s a good time for the industry to establish itself,’ notes Marcos Vaena, Country Coordinator of the International Finance Corporation, which is facilitating the establishment of the Chamber. ‘The Government is supportive and it represents the maturity of an industry now looking at the Solomons in a serious way.’

Local skills and services

With several companies, such as Allied Gold, Nautilus and Newmont, having existing operations in neighbouring Papua New Guinea, it is no surprise to see the PNG Chamber of Mines and Petroleum advising on the Solomons Chamber. The Solomons mineral sector is already benefitting from the pool of experienced mining and mine services companies on its doorstep, both in Australia and PNG.

The next step will be to encourage local skills and services. Marcos Vaena reports the IFC is in discussions with ExxonMobil to see if something like its PNG Enterprise Centre, which supports indigenous companies looking to provide services to its liquefied natural gas project, might be replicated in the Solomons.

No matter how quickly it develops from here, it’s clear mining has come a long way since those dark days of May 2000 and is showing significant promise for the future.

First published in Business Advantage Solomon Islands 2012/13