Gold’s remarkable year
Gold truly enjoyed a remarkable 2024, relentlessly powering higher to many new records.
Barrick Gold has offered an extra 15% stake in its Porgera gold mine in Papua New Guinea to local landowners, according to a letter from its CEO, in a bid to break an impasse with the national government over the mine’s future.
Barrick, the world’s second-largest gold miner, was last month refused an extension of its expired lease over the mine that has been troubled by social unrest and pollution concerns.
Any deal would be the first struck by a resources company under economic nationalist prime minister, James Marape, who came to power a year ago seeking to retain a bigger share of the country’s resource riches.
Talks between the government and Exxon Mobil over a gasfield broke down in February, leaving a proposed $13 billion gas project expansion in limbo, while Australia’s Newcrest Mining Ltd is in talks on a major gold project.
Bristow’s letter added that Barrick was willing to further increase the landowners’ equity stake, but only if other terms such as corporate taxes were relaxed
The government’s position on Barrick’s offer is unclear. Marape’s office did not immediately respond to a request for comment and he has previously expressed a desire for the state to operate the mine itself.
Barrick is challenging the rejection of its lease extension in court. However, negotiations have also proceeded via back-channels after Marape, appointed the district’s local member, Tomait Kapili, as a go-between.
“In light of the Prime Minister’s positive engagement through you, we would like to go further and improve the equity portion of the … offer to 15% free equity, for a total of 20% equity to be held by the PNG side including the 5% currently owned,” Barrick’s chief executive officer Mark Bristow wrote to Kapili last week, in a letter reviewed by Reuters.
Kapili does not have the authority to accept or refuse the offer because Marape appointed him only to deal with matters relating to local landowners, a separate letter from Marape to Kapili and reviewed by Reuters showed.
Kapili and Barrick did not immediately respond to requests for comment on Friday. A spokesperson for the joint venture, Barrick Niugini Ltd, declined to comment because the case was before court.
Barrick and China’s Zijin Mining Group each own 47.5% of the Porgera mine high in mountainous Enga province, about 600 km (375 miles) north-west of the capital Port Moresby. The remaining 5% interest is held by landowners through Mineral Resources Enga.
Bristow’s letter added that Barrick was willing to further increase the landowners’ equity stake, but only if other terms such as corporate taxes were relaxed.
He said over the 20-year mine life, PNG would receive $4.7 billion in cash flow, compared with $3.5 billion for the joint venture, based on a long term gold price of $1,300 an ounce. Gold prices hit 7.5-year highs above $1,750 an once this month.
The mine contributed about 208 million kina ($60 million) to Papua New Guinea’s government income in 2018, according to a report by extractive industry transparency group EITI – roughly 1.5% of government revenue in that year.
Bristow also said the decision to refuse the lease extension had “stunned” his company, forced it to halt production and “created significant liabilities and potentially material damages to Zijin and Barrick.”
Operations at the mine have stopped and PNG’s National Court is due to rule on Wednesday on whether Barrick’s court challenge to the lease extension refusal can proceed.
(By Tom Westbrook, Melanie Burton and Tom Daly; Editing by Richard Pullin)
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