Barrick Gold offers landowners a stake to resolve mine dispute

[SINGAPORE] Barrick Gold has offered an extra 15 per cent stake in its Porgera gold mine in Papua New Guinea to local landowners, according to a letter from its chief executive officer (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 ExxonMobil over a gasfield broke down in February, leaving a proposed US$13 billion gas project expansion in limbo, while Australia's Newcrest Mining is in talks on a major gold project.

The government's position on Barrick's offer is unclear. Mr 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 Mr 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 per cent free equity, for a total of 20 per cent equity to be held by the (Papua New Guinea) side including the 5 per cent currently owned," Barrick's chief executive officer Mark Bristow wrote to Mr Kapili last week, in a letter reviewed by Reuters.

Mr Kapili does not have the authority to accept or refuse the offer because Mr Marape appointed him only to deal with matters relating to local landowners, a separate letter from Mr Marape to Mr Kapili and reviewed by Reuters showed.

Mr Kapili and Mr Barrick did not immediately respond to requests for comment on Friday. A spokesperson for the joint venture, Barrick Niugini Ltd (BNL), declined to comment because the case was before court.

Barrick and China's Zijin Mining Group each own 47.5 per cent of the Porgera mine high in mountainous Enga province, about 600 km north-west of the capital Port Moresby. The remaining 5 per cent interest is held by landowners through Mineral Resources Enga.

Mr 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, Papua New Guinea would receive US$4.7 billion in cash flow, compared with US$3.5 billion for the joint venture, based on a long term gold price of US$1,300 an ounce. Gold prices hit 7.5-year highs above US$1,750 an once this month.

The mine contributed about 208 million kina (S$85.2 million) to Papua New Guinea's government income in 2018, according to a report by extractive industry transparency group EITI - roughly 1.5 per cent of government revenue in that year.

Mr 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 Papua New Guinea's National Court is due to rule on Wednesday on whether Barrick's court challenge to the lease extension refusal can proceed.

REUTERS

KEYWORDS IN THIS ARTICLE

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes