WHILE a start-up of mining at the Wafi-Golpu project in Morobe Province is still a number of years away, the recent registration for a Special Mining Lease for the project was a major milestone and a reason for the PNG resources sector to celebrate.

The application for SML-10 is a critical step in allowing the Wafi-Golpu JV partners Harmony and Newcrest to continue their preparations for a Final Investment (FID) for what is rated as one of the largest undeveloped mineral projects in the region.

Announcing the registration of the application for the SML recently, PNG’s Mineral Resources Authority (MRA) managing director, Philip Samar, said the project – which has an estimated capital development cost of US$2.64 billion – would provide many benefits to the country and its people.

“Registration of the SML is a significant milestone for the companies involved and for Papua New Guinea, coming at a time when the mining sector is perhaps commencing a recovery from a severe cyclical downturn,” Mr Samar said.

“This Wafi-Golpu Project application, together with the recent Frieda River application, further boosts PNG’s status as a highly ranked and prospective, global, mining investment destination. It provides growing confidence for the future of our mining industry, which has long been the mainstay of the Papua New Guinea economy.

“As a developed mine, the project will increase national gross domestic product and export earnings and provide a long term boost to government revenues. It will also generate benefit streams to landowners and host communities, as well as create new employment and business development opportunities during project construction and operation,” he said.

Mr Samar pointed out that it was unusual in the history of major mine development in PNG that such a major, long term, mining operation will be situated only a short distance (approximately 65 km) from a large urban centre, being Lae.

The project comprises a number of economically significant deposits, namely the Golpu copper and gold porphyry deposit, the Nambonga porphyry deposit and the Wafi epithermal gold deposit.

“Wafi-Golpu is considered a world class deposit, lending itself to a phased development approach. Wafi-Golpu will be the largest underground mine in Papua New Guinea, utilising a proven block cave mining method, which has been highly successful in Newcrest’s Cadia mine in Australia,” Mr Samar said,

“It is a high productivity, low cost mining method, generating less surface waste material and enables higher value ore located at depth to be accessed earlier.”

The Golpu deposit has a JORC compliant mineral resource of 824Mt at 1.05% Copper, 0.70g/t Gold, 1.25g/t Silver and 90ppm Molybdenum.

Mr Samar said that from grant of the lease, the obtaining of other associated permits, approvals and agreements and approval by the boards of directors of Harmony and Newcrest, there will be an estimated development period of five years to commencement of production.

The initial life of the mine is expected to be 28 years, with the pre-feasibility study supporting further expansion to extend the initial operation beyond 40 years. The estimated average annual production of metal in concentrate over the initial life of mine is 102,000 tonnes of copper and 198,000 ounces of gold.

Mr Samar said the registration of this SML 10 application now triggers a series of activities prior to grant of the SML, which include:

  • The assessment of the Proposals for Development submitted by the applicants by a technical team at MRA, and subsequent review and recommendation for grant of the tenement to the Head of State, by the Mining Advisory Council (MAC).
  • The Conservation and Environment Protection Authority (CEPA) assessment of the application for an environment permit, which is a pre-requisite to the recommendation of the SML by MAC.
  • The convening of a Development Forum by the Minister for Mining, inviting such persons as will fairly represent the views of the applicant for the SML, the landholders of the land subject to the various tenement applications, the National Government and the Provincial Government, in whose province the SML is situated.
  • A Memorandum of Agreement (MOA), being the key outcome from the Development Forum. The MOA establishes and records the recipients to benefit streams anticipated to flow from the project. This process is facilitated by MRA.
  • The State determining whether it will, and if so, in what percentage up to a maximum of 30%, exercise its option for equity participation in the mine. The State has until the SML grant date to exercise its option determination.
  • Negotiation of a Mining Development Contract (MDC) between the applicants and the State. Review of the equity option and settling the MDC, based upon the business case set out in the Proposals submitted with the SML application, is under the chairmanship of the Ministerial Committee on the Economic Sector (MCES). In 2015 NEC re-established a State Negotiating Team (SNT), reporting to the MCES, for the purpose of negotiating commercial undertakings and any participating interest of the State in all mining projects in PNG.
  • Warden hearings for each tenement, which are designed to gauge the views of affected landowners, will be held following public advertisement at nominated venues associated with each tenement application.

The Warden Report is provided to MAC for its deliberations.

  • Compensation Agreements, which the applicant is required, under the Mining Act 1992, to have negotiated and agreed with impacted landowners, prior to entry or occupation of the land for mining. MRA reviews the draft agreement(s) prior to their registration.

The general time estimation for approvals is between 12 and 18 months, perhaps longer on account of the National elections next year.

Harmony Gold CEO, Peter Steenkamp, said the application for the SML brought his company one step closer to realising more value for Golpu.

Recent studies project a staged development at Wafi—Golpu, with Stage 1 of the project focusing on the establishment of a high grade start-up mine comprising two separate block caves. Stage 1 ramps up from an initial three million tonnes per annum (Mt) from BC1 to a steady-state production level of 6Mt per annum from BC2, and continues for approximately 28 years, mining 149Mt of the Golpu ore reserve.

This first phase development will focus on two block caves, BC 1 and BC 2 and all associated infrastructure required.Stage 2 represents a future option of development in which Stage 1 is expanded to a larger volume mining operation in two steps, namely the debottlenecking of primarily the process plant, followed by increasing the BC2 production rate to 14Mt per annum.

The debottlenecking of the mining infrastructure is done to accommodate an increase in production from 6Mt per annum to 7Mt per annum with only minor changes in the infrastructure contemplated in stage 1.

The phase (expansion) increases production from 7Mt per annum to 14Mt per annum by doubling the processing capacity by installing a second 7 Mt per annum process plant.

A third step, being the establishment of BC3, focuses on sustaining production at 14Mt per annum over the life of mine. This last phase targets a third and larger block cave, BC 3, with a 14 Mt production rate and will require an additional ventilation shaft, as well as additional decline development for access and material handling.

The development schedule in the Stage 1 study assumes that the owners will obtain a SML and associated required environmental and other permits by July 2018, which is when the project will go into its construction phase.

Two years have been allowed for the permitting process, commencing from the date of submission of the special mining lease application.