The operator of Papua New Guinea’s Simberi gold mine is aiming to extend the mine’s life by at least 10 years and triple annual production. In an exclusive interview with Business Advantage PNG, St Barbara’s CEO Andrew Strelein outlines how his company is expediting these plans, including a deal to sell a minority share in the mine to Kumul Minerals.

Drone picture of Simberi mine and processing site. Credit: St Barbara

St Barbara has “accelerated” a project to extend the life of its Simberi gold mine, and it has brought a useful ally into its corner, thanks to a recent deal to sell up to 20 per cent of the mine to state-owned Kumul Minerals Holdings (KMHL).

The project, first announced in May 2024, will begin by extending oxide production into 2026. St Barbara hopes to then extend the mine life to at least 2036 by processing ore from sulphide mineralisation contained below the oxide pits.

These plans are now “moving at quite a pace,” Managing Director and CEO Andrew Strelein tells Business Advantage PNG.

“We’ve got a study at the moment to revise the plant design. We’ll go into feasibility study in February. We were looking at first production from the sulphides in late 2027, but now we’re hopeful that we’ve brought that forward because we’ve accelerated some of the aspects of the project.”

Once the sulphide phase begins, Simberi’s annual gold production will jump to more than 200,000 oz per annum, well above the current 60,000-70,000 oz range, according to Strelein.

“The cost structure won’t really go up that much from what we’re currently doing. The mining rate won’t be much more, [but] the mill will actually be more efficient, it’ll do more tonnes,” he says.

“The sooner we can get to that, the better.”

“They [KMHL] will buy their interest at an agreed market value, and participate in the capital expansion proportionately.”

Building stakeholder support

In December 2024, St Barbara outlined that it had taken several steps – each involving PNG stakeholders – to expedite its life-extension project.

One was the submission to the Mineral Resources Authority (MRA) of an early application to renew its mining lease. Simberi commenced production in 2008 and last renewed its mining lease in 2018, with the next renewal only due in 2028. Strelein says his company decided to push for an early renewal in order to give confidence to would-be financiers of the sulphide project.

Next was a Memorandum of Understanding with KMHL, which will see the two parties negotiate towards KMHL, which already has stakes in PNG’s Ok Tedi and Porgera mines, acquiring up to a 20 per cent interest in the Simberi mining licence and a farm-in of up to 20 per cent on other exploration licences in New Ireland Province’s Tabar island group.

“They [KMHL] will buy their interest at an agreed market value, and participate in the capital expansion proportionately,” Strelein says.

“We’re not setting any unrealistic expectation in terms of the timeline, but we want to have it resolved well before we get to a final investment decision. We’d be expecting it in the early months of this year.

“It’s an important step. As everyone knows in PNG, there’s a big interest in making sure more of the assets are owned and developed by Papua New Guinea.”

Bringing in landowners

Lastly, St Barbara said it had received strong support from landowners for a proposal to pay them the greater of a 10 per cent Net Profits Royalty or a 3 per cent Net Smelter Return (NSR), instead of the existing 2 per cent (NSR).

Strelein notes this model is unique in PNG, where landowners traditionally hold a direct interest in the project, but common around the world.

“We prefer it. From our discussions with the landowners in the region, we recognise that the desire is more for the benefits from the royalty, not the obligations of being a board member and making decisions about how to develop the project.

“They want to be consulted as the landowners and stakeholders. They want to share the benefits. [But] they’re not really hung up on directly owning an interest.

Optimism

Looking forward, Strelein believes the arrangement with KMHL and the application for an early renewal will position it to achieve its plans for Simberi.

“From the point of view of the PNG government, they know we’ve got a mining lease renewal, they know that we’re making available 20 per cent for negotiation,” he says.

“Hopefully things will keep moving quite clearly from here.”

St Barbara to appeal PNG IRC assessment

On 24 December, Simberi was notified by the PNG Internal Revenue Commission of an assessment of K523 million in back taxes dated to 2008 and earlier.

The assessment comprised K435 million relating to income tax assessed in relation to the calculation of allowable capital expenditure asset values since 2006 and the impact of that on depreciation deduction claims from 2017 to 2021. The K88 million balance related to a deemed dividend withholding tax, assessed on a debt-to-equity transaction of the re-capitalisation of Simberi Gold in 2018.

St Barbara issued a statement rejecting the IRC’s arguments and confirming it would appeal within the 60-day appeal period.

“The receipt of this IRC Amended Assessment, backdating changes to 2008 and earlier, just as IRC were closing down its office for Christmas was disappointing – particularly when such positive progress has been made with Mineral Resources Authority and with Kumul Minerals Holdings Limited on the development of the Simberi Sulphides,” Managing Director and CEO Andrew Strelein said at the time.