Barrick Gold (TSX: ABX) (NYSE: GOLD) welcomed Friday a court ruling ordering the government of Papua New Guinea (PNG) to review a requested lease extension for the Porgera gold mine.
The world’s second largest gold
producer and its Chinese partner, Zijin Mining, temporarily
halted operations at the mine in Enga Province last weekend, following Prime
Minister James Marape’s decision
not to renew Porgera’s long-sought lease.
The government hit back on Monday, saying it would be “forced” to take immediate control of the mine if it remains closed during the transition period.
PNG’s National Court has ordered the parties to report on the progress of talks before returning to court on May 8.
State-owned Zijin followed suit. It
said that if PNG didn’t conduct negotiations to extend the mining lease in good
faith, the issue could
impair the country’s relations with China.
The National Court’s order calls PNG
and Barrick to negotiate before returning to court in a week on May 8, to
report on the progress of talks, local Post-Courier
reported.
It also instructed Barrick Niugini
Limited (BNL), the manager of Porgera, to maintain the mine infrastructure and
assets during negotiations.
If talks fail, BNL said, the
court would appoint an accredited mediator to facilitate dialogue between the
parties.
Barrick and Zijin had applied in
June 2017 for a 20-year renewal of the Porgera’s lease, which expired in
August.
Since then, the company has
faced backlash from landowners and residents over what they
claim are negative social, environmental and economic impacts from the mine.
Negotiations with Porgera’s
operators were complicated further by a split among the landowners.
Tier One Potential
Barrick’s president and chief
executive officer, Mark Bristow, in March that Porgera had “tier one potential” but faced many
challenges in the form of “legacy issues and an unruly neighbourhood.”
The gold mine, located in PNG’s
northern highlands region, is a joint venture between Barrick and Zijin Mining.
Each own 47.5% of the mine, with the remaining 5% held by landowner group
Mineral Resources Enga.
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.
Porgera contributes to about 10% of the nation’s exports and employs over 3,300 Papua New Guinea nationals.
“We don’t have many details on the
implications of this decision yet, including the timing of the transition,”
Jackie Przybylowski of BMO Capital Markets said late April in a research note.
“Barrick has warned that it will
pursue all legal avenues to challenge the government’s decision and to recover
any damages. We expect that discretionary spending, such as development capex,
will be minimized through the current period of uncertainty,” Przybylowski
noted.
The mining analyst also said that
“while removing Porgera from Barrick’s portfolio would have a negative
financial impact, it would improve the ESG performance of the company’s
portfolio going forward.”
“On its website, Barrick reports
allegations of human rights violations in the region,” she pointed out,
“including allegations of ‘extreme’ violence linked to local police forces or
private security forces acting on behalf of the joint venture.”
Other mining companies operating in
PNG, including Australia’s Newcrest (ASX: NCM), have not been impacted by the
decision regarding Porgera.
The miner has “welcomed” the Prime Minister’s
support for its Wafi Golpu gold and copper asset, adding that its
special mining lease at the Lihir operations remains in good standing with a
lease renewal not expected until 2035.