Exploratory work stakes out potential mine projects in Papua New Guinea

 

The string of successful mines dotting Papua New Guinea, from the Panguna mine in Bougainville to Ok Tedi in the Western Province, has demonstrated many times over the substantial mineral potential lying just beneath the surface across the country. These proven success stories, which have rewarded the efforts of earlier pioneering mining operations, are now acting as a guide for the next generation of miners seeking to carve out their own mark in the industry. Bucking the current trends of the global mining investment climate, a handful of companies are pressing on with their efforts to map out the next deposits to carry the mining sector into the future, while hundreds more tenements are only beginning to be looked at.

As of January 2016 there were 125 active exploration licences (EL) granted by the Mineral Resources Authority (MRA) along with another 54 ELs in the process of applying for renewals. Interest in new prospects remains robust, although not quite to the same level as the peak years earlier in the decade. Another 72 EL applications blanketing the country have been submitted for review and are pending government approval, the majority of them (52) since 2015.

More than a half-dozen projects are currently in the advanced stages of exploration work across the country, including the large-scale Frieda and WafiGolpu projects, along with a number of lower-profile yet high-potential projects including Kili Teke, Mount Kare, Star Mountain, Yandera, Woodlark and Crater Mountain. Taken cumulatively, these budding mining projects in the PNG pipeline have the potential to yield more than 30m tonnes of copper and 73m oz of gold, according to mining company estimates.

Star Mountain

One promising project which has received a solid vote of confidence in the form of fresh financing for exploratory works is the Star Mountains mine located in West Sepik province near the Indonesian border. Headed up by PNG-incorporated and -registered mining company Highlands Pacific, the firm is looking to exploit copper and gold porphyry deposits located just 25 km north of the long-running Ok Tedi mine within the highly prospective New Guinean Orogenic Belt, which also hosts the Grasberg, Porgera and Hidden Valley mines, as well as the Frieda deposit. In all, the prospective area encompasses 515 sq km of area split between four separate exploration licence tenements.

Fresh Interest

Already under development by Highland Pacific since the 1960s, the Star Mountain project has generated renewed momentum recently with a cash infusion of $5m in 2015 and a further $5m in February 2016 from its new partner Anglo American. The two companies signed a joint venture (JV) and farm-in agreement in December 2014 which will provide needed capital to further exploratory and development efforts from a well established mining company, while providing Anglo American access to a high-potential mineral deposit in its initial foray into PNG. In addition to the $10m payment, the JV and farm-in agreements will shift the ownership structure in the project over two phases.

During the first phase of development Anglo American can earn a 51% stake in the JV by spending $25m on exploration over four years and declaring an inferred resource of 3m tonnes of contained copper equivalent within five years. In the second phase the company can boost its stake in the project to 80% by financing and completing a Bankable Feasibility Study (BFS) within 15 years of the execution of the farm-in and JV agreements. Under the terms of the agreement, Anglo American will also be required to supply Highlands Pacific with up to $150m in project development funding as a deferred free-carry following completion of the BFS.

Although Highlands Pacific still maintains operational control over the project, Anglo American retains the right to take over management of the project when it has invested $25m in project expenditure.

The practical result of this partnership is already taking place on the ground as exploration efforts have accelerated in 2015 and into 2016. The 2015 drilling campaign focused on the six sites at Olgol and three at the Kum Kom locations within EL 1312, with a total of 5000 metres drilled on the $10m budget for the campaign. The first drilling revealed encouraging results: Highlands identified 17 copper and gold targets by the end of 2015, with five of the six drill sites encountering mineralisation. These samples contained varying amounts of precious metals ranging from 0.52-1.42% copper and 0.37-1.39 grams per tonne (g/t) of gold. In addition to the drill samples, Highlands Pacific also completed its remote sensing coverage in 2015 along with a helicopter-borne radiometric survey of the area.

Kili Teke

The attractive geological conditions of the area have also drawn interest from South Africa-headquartered mining company Harmony Gold, which is moving forward with exploration work on its Kili Teke project in the Hela Province, just to the west of the Porgera mine and east of Ok Tedi and the Star Mountain development. The company is currently working within its wholly-owned EL 2310 tenement targeting a high-margin copper and gold inferred resource area 600-metres long, 300-metres wide and 400-metres deep within the mineralised zone.

After initial mineral resource estimates for the site projected 1.2m oz of gold and 506,000 tonnes of copper in November 2015, more exploratory work has continued at the site through to mid-2016. These activities include infill and extension drilling projects along with follow-up work targeting high-grade deposits within the broader geochemical footprint to the tenement. Additional drilling carried out in early 2016 has further bolstered expectations for the mine: samples from the new zones near the surface were found to contain levels of 0.52% copper and 0.35 g/t of gold, according to company reports.

Other boreholes exploring depth extensions of porphyry related quartz-vein stockwork mineralisation exhibited 0.59% copper and 0.42 g/t of gold, while high-grade massive sulphide chalcopyrite-bornite skarn mineralisation showed the most potential with 12.98% copper and 11.45 g/t of gold.

Commenting on these results, Peter Steenkamp, CEO of Harmony, noted: “It is a rare phenomenon, in this day and age, to drill a 584 metre borehole and achieve grades averaging over 0.5% copper and 0.35 g/t of gold from surface. Massive sulphide lodes averaging 13% copper and 11.4 g/t of gold are even rarer, which is what we are seeing from our Kili Teke drill results.” Harmony plans a revised mineral resource estimate incorporating the latest drill results for the fourth quarter of 2016.

Yandera

The Yandera project in the Madang Province is also moving forward with exploration efforts after operator Era Resources secured new funding in 2015 for the purpose of exploration and general operations. Formerly known as Morengo Mining, the Toronto-listed company closed the first $7m tranche of the planned issue of $14m worth of convertible unsecured debentures to its major shareholder, Sentient Executive GP IV in November 2015.

These funds will be used in part to fund the ongoing resource upgrade as part of the mine’s feasibility study begun in 2015 and scheduled for completion by the end of 2016. The exploration activities within this stage of development include infill drilling and step-out drilling to link pit shells and expand the resource footprint of the project, with the eventual goal of obtaining updated resource and reserve estimates by the end of 2018. This will be done in preparation for obtaining a special mining lease for 2019. Era Resources hired Titeline Drilling to drill infill tests starting in April 2016 and targeting the Omora, Gremi, Dimbi, Gamagu and Imbruminda areas with the testing of proximal targets to commence afterwards.

These efforts follow closely on the heels of sampling efforts undertaken in 2015 of the Pomiea prospect, which included the collection of 230 rock samples that displayed elevated copper levels along with locally anomalous silver and molybdenum. The find included dozens of samples that demonstrated a copper content in excess of 1%; many registered levels of 3% and greater. Resource estimates of the copper porphyry system compiled in May 2015 demonstrate a measured and indicated total resource of 2.1m tonnes of copper along with 1.44m oz of gold and 62,000 tonnes on molybdenum.

In addition to these significant copper and gold mine projects, which are continuing to invest in exploration activity as they ride out the current commodity price dip, a number of other companies have also begun to demonstrate interest in new exploration projects throughout the country. Many of these early-stage projects are being primarily spearheaded by junior or smaller mining companies, which have combined to apply for a total of 36 new ELs in 2015 and another 13 in the first three months of 2016.

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The Report: Papua New Guinea 2016

Mining chapter from The Report: Papua New Guinea 2016

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