Rio Tinto eyes return to Panguna mine - Solomon Star News

Rio Tinto eyes return to Panguna mine

13 March 2014

BUKA, PNG - Bougainville Copper is to open an office on Bougainville Island this year as sentiment begins to build within Papua New Guinea for a resumption of mining of the giant Panguna copper deposit.

The visit to Bougainville Island by the PNG Prime Minister Peter O'Neill earlier this year - the first visit by a government official of his standing in more than 15 years - has prompted conciliatory sentiment towards production resuming, the company told shareholders.

This visit was followed by the head of the autonomous Bougainville government, John Momis, who has signalled the willingness of most parties on the island to resuming production.

Civil war forced Rio Tinto unit Bougainville Copper to halt production in 1989 at what was then one of the largest copper mines in the world.

The Panguna mine was the largest single source of the country's export revenues and comprised about 7 per cent of global copper production.

One recent estimate put the cost of reopening the mine at more than $US4 billion, although it is unclear whether Rio would be willing to foot the bill for much of this work or would seek partners from the outset. This study was by the US Agency for International Development, which outlined a series of approaches that could stabilise developments on the island amid a push for greater autonomy from Port Moresby, which could pave the way for mining.

Along with resolving a series of technical issues before resuming production, perhaps more important is achieving agreement on revenue sharing with the island, which was one of the prime reasons for conflict over the mine so soon after production began.

Under the original revenue-sharing agreement, the bulk went to the central government but only a minor portion of the funds went to Bougainville's provincial government.

In its latest report to the stock exchange Bougainville Copper said no major studies into resuming production would begin until there was broad agreement between the various parties supporting the project.

In 2012, preliminary studies were conducted and they supported the project's prospective financial and economic viability.

The new office will play a key role in assessing remediation issues, as well as “'community development programs, social mapping, asset revaluation and de-risking”.

Major studies such as pre-feasibility and bankable feasibility studies will not be launched “until consultations with governments, landowners and other stakeholders result in broad agreement for redevelopment”, the miner has told shareholders.

Before the suspension of mining, the Panguna site was producing about 180,000 tonnes of contained copper annually, along with a quantity of gold.

Bougainville Copper is 53 per cent owned by Rio Tinto, with the PNG government holding a further 19 per cent.

The Panguna mine was not the only project of Rio's in PNG that ran into difficulties.

The group lost control of the Mount Kare gold deposit 20 years ago, when it was overrun by local miners who have tapped the alluvial reserves overlaying this deposit.

A smaller company, Indochine Mining, is now finalising an agreement with the landowners so mining can begin.


- SMH/Pacnews