PNG’S Mineral Resources Authority (MRA) says new data suggests that the mining activity in the country is bouncing back after hitting a low point in 2015 – with the applications to mine at Frieda River and Wafi-Golpu offering unprecedented development opportunities.
Releasing its latest Mining Exploration Update, the MRA said its data – particularly that related to revenue generated from the export of minerals – is a good guide to the health of the mining sector.
MRA managing director, Philip Samar, said the authority believes that revenue figures generated in 2015 suggest that the country had passed a low point in the current depressed mineral commodity cycle.
The MRA reported that total revenue dropped to K7.192 billion, significantly below the estimated K8.2 billion plus that has been recorded on actual export data to July 2016.
Mr Samar said the rebound in gold prices (with gold accounting for 85% of mining revenue), higher production from the Lihir mine and the resumption of gold and copper exports from the Ok Tedi mine from March this year were key elements in the big turnaround.
The MRA also pointed to a strong increase in licence related activities.
“Another key indicator is mineral tenement activity and our figures for 2016 indicate the total number of tenements (all types – exploration licences, alluvial and mining leases and supporting tenements, such as leases for mining purposes and easements) increased for January to August 2016 from 507 to 543 (a sever per cent increase),” Mr Samar said.
“This can be contrasted to total tenement applications in 2015 at 128 compared to a forecast of 170+ this year, which would represent a 32.8% increase.
“This is consistent with new and renewal applications and overall active tenements all being up on the previous year. This is indicative of a slow lift off the bottom of the cycle, although the situation will always be subject to some volatility, caused by external international events that have influences outside PNG’s control,” Mr Samar said.
The MRA report also noted a slight increase in exploration licence activity, with the number of active licences for the period January to August 2016 increasing from 125 to 134 (again a seven per cent increase), which is consistent with the renewals increasing from 54 to 68.
“Again the message from this data is that the decline in exploration has stopped and there are incremental increases in activity, which indicate more positive signs for the sector. It should be noted that these historic figures are heavily influenced by one company, Nautilus, which released over 50 offshore exploration licence areas during the period from 2014,” Mr Samar said.
The MRA said there has also been a turnaround in exploration expenditure, which has shown a significant drop from 2013 (K595.7m) to maintain a reasonably steady state of expenditure of around K350m for the past three years.
“The downturn in mineral commodities hit in 2012, hence the immediate reaction the following year as explorers reassessed their tenement commitments, staff levels and work programs with funding sources becoming scarce,” Mr Samar said.
“Much of the current expenditure is confined to a small number of advanced tenements, such as Frieda River, Wafi-Golpu, Star Mountains, Townsville and Kili Teke.
“However, at the end of the day interest in the prospectivity of PNG, which is consistently recognised in the top five of global rankings, remains high. This is borne out by the registration of Special Mining Lease (SML) applications for two world ranked (top 10) resource prospects at Frieda River and Wafi-Golpu, within the last three months, as well as entry to PNG by world class miners such as Anglo American and Rio Tinto.”
Mr Samar said the lodging of the two SML applications is unique in the history of mine development in PNG, with one major project a decade the norm in the past.
Total capital expenditure for these projects is anticipated to exceed K21million over a five year period commencing from grant of the SML’s, and final investment decisions by the project proponents.
“On current mineral prices these two projects alone could add approximately K7 billion per annum in export revenue by the mid-2020’s, almost equivalent to current total export revenue,” Mr Samar said.