Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Barrick Gold (TSX: ABX) (NYSE: GOLD) has cut its 2020 production guidance after encountering conflict last month with the government of Papua New Guinea over the Porgera gold mine.
The world’s second-largest gold producer now expects to produce between 4.6 million and 5 million ounces of gold this year — 200,000 ounces lower than its previous estimate.
Barrick had said it did not expect any significant impact on production from the coronavirus outbreak, which has forced the closure of mines worldwide — some of them permanently.
Barrick had said it did not expect any significant impact on production from the coronavirus outbreak. After the Porgera incident, it lowered guidance for the year by 200,000 ounces
The Canadian miner and its Chinese partner in Porgera, Zijin Mining, temporarily halted operations at the mine last week. The move stemmed from Prime Minister James Marape’s decision not to renew the operation’s long-sought lease.
PNG hit back, saying it would be “forced” to take immediate control of Porgera if it remained closed during the transition of ownership period.
China-owned Zijin has also had its say. The company warned PNG that if it didn’t conduct negotiations to extend Porgera’s mining lease in good faith, the issue could impair the country’s relations with Beijing.
It also temporarily paused last week with a local court ruling ordering the mine in Enga Province to remain shuttered, while Barrick, Zijin and the PNG government hold talks.
The parties have been instructed to return to court on May 8 to report on progress. If an agreement hasn’t been reached, the court will appoint a mediator.
Barrick revealed on Wednesday that PNG is also asking the company and Zijin to pay $191-million in back taxes, arising from tax audits of Barrick Niugini Limited (BNL), the manager of Porgera, conducted between 2006 and 2015.
The Toronto-based miner said the request, received on April 9, had no merit.
Barrick and Zijin had applied in June 2017 for a 20-year renewal of the Porgera lease. The permit expired in August last year, but production had continued under a court-approved extension.
Since then, the parties have faced backlash from landowners and residents over what they claim are negative social, environmental and economic impacts from the mine.
“Porgera faces many challenges in the form of legacy issues and an unruly neighbourhood”
Barrick’s president and CEO, Mark Bristow
Negotiations with Porgera’s operators were complicated further by a split among the landowners.
Barrick’s president and chief executive officer, Mark Bristow, said in March that Porgera had “tier one potential”, which means it could have a life of at least 10 years. It also means it would produce more than 500,000 ounces of gold per year in the lower half of the industry’s cost range.
The asset, however, faces many challenges in the form of “legacy issues and an unruly neighbourhood,” he noted.
Porgera contributes to about 10% of the nation’s exports and employs over 3,300 Papua New Guinea nationals.
The open pit and underground gold mine sits at an altitude of 2,200-2,600 metres in Enga province, and is about 600 km (370 miles) northwest of Port Moresby.
Comments
Philip Oa
It is a sad sight to have an issue as such during this current out break of the pandermic situation affecting the world.