LONG time PNG miner and explorer Highlands Pacific believes the Frieda River copper/gold project has moved an important step closer to development following the completion of a new Feasibility Study.
Highlands Pacific reported that is has now received the feasibility study ffrom the project manager PanAust Limited, which contains a major turn around in options for Frieda River, one of the largest undeveloped copper and gold deposits in the world
Highlands, whicb holds a 20% interest in the Frieda River joint venture, said the feasibility study follows a consultative process, field work programme and extensive review of PanAust’s previous development plan which was outlined in its May 2016 feasibility study, which was subsequently updated in an addendum in March 2017.
The company said the 2018 feasibility study adopts a fundamentally different approach to the project, considering the Frieda River Copper-Gold Project within a broader regional development context and requiring extensive third party or government investment in regional infrastructure as a prerequisite.
The revised approach presents changes to prior studies in a number of ways including:
- It generates revised production metrics and overall project economics based on the same copper price assumption as the previous study but a slightly lower gold price. Under a single ownership structure, the combined project including the Frieda River mine and process plant, together with the hydro-electric facility, but excluding road, transport and regional power transmission infrastructure, has a total pre-production capital cost of US$6 billion and generates a post-tax Internal Rate of Return of 11% in real terms, with a seven-year implementation schedule.
- It relies on the construction and upgrade of roads linking the mine site to the Port of Vanimo on the northern coast of PNG.
- It requires an upgrade of the Vanimo Port as well as the existing airstrip at Green River to create a new shared-use regional airport.
- The total cost of the road, airfield and port upgrades is estimated at US$739 million, to be funded by government and/or public-private partnerships
- It requires a 340km slurry pipeline to be built linking the process plant at the mine site with the Port of Vanimo. The pipeline will cost US$351 million and will be operated by a third party on commercial terms. The prior project plan had relied on barge transport down the Sepik River to deliver concentrate to a port for loading on ocean going vessels and to deliver supplies up-river to the mine and process plant.
- Like the previous development proposal, the 2018 plan requires the construction of a hydro-electric power station integrated with a tailings and waste rock storage facility (an integrated storage facility [ISF]). However, the latest study has relocated the proposed facility to increase power production to meet processing requirements and enable the sale of excess power. The 2018 study also considers the hydro-electric facility as having a separate ownership structure from the copper/gold project, albeit with the two projects being interdependent.
- The development plan assumes the sale of excess power from the proposed hydro-electric facility to third parties via a transmission network to be constructed at a capital cost of up to US$418 million inclusive of a rural electrification network along the road corridor.
- The entire project requires increased total capital investment of more than US$7 billion encompassing the cost of the mine development, process plant, ISF and hydro-electric power plant, road construction and airport upgrades and power transmission network.
- It proposes a much longer mine life of 33 years, compared with 17 years in the prior study.
Highlands Pacific managing director Craig Lennon said the feasibility study represented a further step towards unlocking the value of the giant Frieda River project.
“A great deal of work has gone into the preparation of this visionary and ambitious development concept, aimed at overcoming some of the many logistical challenges associated with construction of a project of this scale in one of the more remote regions of Papua New Guinea.”
“The project, as currently proposed by PanAust, faces significant hurdles, not least of which is the substantial capital cost, but also the need to identify government and other third parties to develop and fund the roads and other regional infrastructure required as a pre-requisite to construction of the project.”
“The Frieda River project has the potential to generate major economic benefits for Papua New Guinea, for the communities in the region, the participants in the project and the shareholders of Highlands Pacific, and we will be seeking to work with PanAust and the other stakeholders to further refine the project and improve returns where possible,” he said.