Focus: Barrick Gold forges ahead on Papua New Guinea mine in face of local backlash

Aion-Tech Solutions

16/01/2020 23:20

(Adds context on Standard Chartered, paragraph 20)
    By Jeff Lewis and Melanie Burton
    MELBOURNE, Jan 16 (Reuters) - Barrick Gold Corp  ABX.TO 
 GOLD.N  is set to elevate its troubled Papua New Guinea mine to
its top-tier assets, despite landowner and government demands to
cede a larger stake and deteriorating security at the joint
venture with China's Zijin Mining  601899.SS .
    With a 20-year lease renewal application in the balance,
Barrick has faced backlash from Papua New Guinea (PNG)
landowners and residents. Critics say the Porgera mine has
polluted the water supply and created other environmental and
social problems, with minimal economic returns for locals.
    Seven people have died at the Porgera mine since September,
including three so-called illegal miners last month in clashes
that prompted Barrick's local entity to appeal for government
intervention.
    Barrick hopes to boost the mine's production by 18% or more.
This previously unreported outlook raises the stakes for Prime
Minister James Marape's government, which has been seeking
richer terms from miners and oil and gas producers.
    The head of the country's mining regulator said Barrick, the
world's No. 2 gold miner, is waiting to begin serious
negotiations for permit renewal terms with the country's
executive council, led by Marape.
    "If we can renew the permit on a reasonable basis, it stands
up as a tier one asset," Barrick Chief Executive Officer Mark
Bristow told Reuters, referring to a large scale, long-life,
high margin deposit.
    PNG's next steps with Barrick could influence billions of
dollars of planned investment by global miners including
Australia's Newcrest Mining  NCM.AX  and St Barbara  SBM.AX ,
who are eyeing new mines or mine extensions, but are wary of
rising sovereign risk.
    Miners, facing a dearth of new deposits and rising resource
nationalism, may now have to cede greater rewards to other
stakeholders.
    "There will have to be equitable sharing of the spoils or
these things won’t be developed or will be discontinued,
ultimately," said portfolio manager Simon Mawhinney, at Allan
Gray in Sydney who is among Newcrest's biggest investors.
    Barrick's tier-one designation, used describe a mine capable
of producing 500,000 ounces of gold annually for at least 10
years at low cost, would place Porgera in league with Barrick's
crown jewel assets at a time major gold miners are desperate to
replace shrinking reserves.
    Barrick and Zijin's combined 2018 production at Porgera was
around 421,500 ounces.
    
    ENVIRONMENTAL ISSUES 
    Barrick has broadened the role of its top China executive
and former U.S. diplomat Woo Lee to handle day-to-day talks with
the PNG government. It has pledged to relocate villagers whose
land the mine has swallowed and study ways to improve management
of mine waste currently dumped in rivers, Bristow said.
    The moves, aimed at mollifying concerns over access to
arable land and pollution of local waterways, may not be enough
to satisfy landowners and the PNG government who want a larger
equity stake.  urn:newsml:reuters.com:*:nL4N25F0J3
    Barrick and Zijin each own 47.5% of the mine, with the
remaining 5% held by landowner group, Mineral Resources Enga.
    Analysts have said Barrick could opt to put its stake on the
block with other assets it has shed to meet a $1.5 billion
divestment target.  urn:newsml:reuters.com:*:nL2N27Y0MV But Bristow played down a
potential sale, saying Porgera fits Barrick’s investment
criteria.
    "It makes real returns, it creates value, it can survive the
cyclicality of the gold industry and will make a significant
contribution to our other stakeholders," he said.
    Barrick's top executive has shown he is willing to make
concessions to settle disputes. In October, Barrick agreed to
sell Tanzania a 16% stake in each of its Bulyanhulu, North Mara
and Buzwagi mines to resolve a long-running fight over taxes.
 urn:newsml:reuters.com:*:nL5N2750H2
    The Canadian miner may face added pressure to confront
issues in PNG that run afoul of investor benchmarks on
environmental, social and governance issues.
    Standard Chartered for example has said it will not provide
financial services directly towards mining operations that
conduct direct marine or riverine tailings disposal.
    Maso Mangape of the Porgera Land Owners Association said
local residents had been squeezed out. "The mine site has now
become a battlefield," he said.

 (Reporting by Melanie Burton in Melbourne and Jeff Lewis in
Toronto; Editing by Denny Thomas, David Gregorio and Grant
McCool)
 ((melanie.burton@thomsonreuters.com Twitter: @MelanieMetals;
+613 9286 1421; Reuters Messaging:
melanie.burton.thomsonreuters.com@reuters.net
Jeff.lewis@thomsonreuters.com; +1-416-687-7723))