Mining companies in Papua New Guinea have been able to keep operating during the COVID-19 crisis. John Lewins, Chief Executive Officer and Director of K92 Mining, says his company actually ‘set records’.

Kainantu Mine operations. Credit: K92 Mining

Speaking at an online conference, K92 Mining boss John Lewins praised Papua New Guinea’s approach to the COVID-19 crisis, saying that its treatment of the resource industry allowed his company to perform well during the pandemic.

‘The government has been very supportive of the resource industry in maintaining operations,’ he said. ‘That included early in the piece providing us with an exemption to move nationals around within the country.’

Lewins said K92 had some roster changes to allow workers to stay on site for three months. Australian expats were also brought in. ‘It has been really important that the support has been there – unlike with many other countries.

‘It is because the government acted very quickly. We haven’t had to see the shut downs that we have seen in many other parts of the world. In our own case, we broke a number of records in our production in this period.’

‘We have increased costs because of perceived country risk with PNG. Many financial institutions won’t even look at financing in PNG.’

Lewins said all mining sites have introduced protocols to manage COVID-19, and most are carrying out testing. ‘That has helped with providing confidence with the mines. Production has basically been maintained on all mines, although some are producing at less capacity.

Gerea Aopi, President of the Papua New Guinea Chamber of Mines and Petroleum, described COVID-19 as a ‘double edged sword’ for the mining industry’s operations. ‘We have all learned to live with more stringent health and quarantine efforts to contain the spread of this virus. The measures will be in place at least until the end of this year.’

Challenges

Lewins said that the all-in-sustaining-cost (a measure of the total cost of mining) is over US$900/oz in Papua New Guinea, above the world average of US$891/oz. He said that uses up about 70 per cent of the revenue the mines generate.

‘The gold mines in PNG spent about US$2.17 billion in 2019 just operating and sustaining capital. Local expenditure was US$1.5 billion. The mines employed 20,000 people, 90 per cent of whom are from PNG. About 50-55 per cent are from the local community.’

‘When you construct a fixed plant you want to make sure it doesn’t become a mobile plant because it has fallen down the hill.’

Lewins said royalty payments in PNG are ‘quite unusual’ because they mostly go to communities rather than the central government. He said this can create challenges because of the ‘incredible diversity’ in the country.

Lewins talks about operating costs during his online presentation.

‘Frequently, the leadership is fragmented and the people are fragmented. Almost invariably there are disputes over land ownership that come to the fore as development comes along. It makes development that much more expensive.’

Lewins said PNG’s terrain (topography) also tends to be challenging. ‘When you construct a fixed plant you want to make sure it doesn’t become a mobile plant because it has fallen down the hill.’

Financing is also problematic.

‘We have increased costs because of perceived country risk with PNG. Many financial institutions won’t even look at financing in PNG. Security of tenure has also come to the fore, especially with [the dispute over the extension of the Porgera special mining lease]. The government’s right to acquire an existing project has always been there; [but] it does detract from PNG as an investment.’

‘Mineral exploration is frequently carried out by juniors and they do not have the capacity to meet the expectations that communities have.’

Lewins said PNG has higher capital costs than in Australia because of the cost of bringing in materials from overseas and the need to build infrastructure. ‘You have to put in your own infrastructure and then you have the expectations of communities as soon as the mine comes along.’

He noted that, globally, mineral exploration had begun to pick up, but in PNG it is going down.

‘Mineral exploration is frequently carried out by juniors and they do not have the capacity to meet the expectations that communities have. And you only have a two-year exploration licence. You just get on to the ground and then you have to start looking at the renewal of your lease.’