Feb 15, 2010

Highlands Pacific denies media reports


RAMU NI-CO’s (MCC) major joint venture partner, Highlands Pacific Limited and State-owned Mineral Resources Development Corporation (MRDC) have denied reports in one of the dailies pertaining to the exact net cost of the Ramu project.

In a joint statement e-mailed to Sunday Chronicle on Friday said the article and another almost identical which appeared in the Post Courier on Friday January 29th, titled “Ramu Mine worth K92b” are misleading.

“Unfortunately the articles contained a number of errors that have completely misrepresented the net worth of the project,” Managing Director of Highlands Pacific, John Gooding said.

He explained that the figures attempted to quantify the potential value of the material in the ground (using erroneous and very optimistic assumptions) and made no attempt to quantify the operating costs or the metallurgical recoveries.

“On the basis of the assumptions used by the writers it could be suggested that all of PNG fisherman have trillions of kina worth of fish based on all the sea life that may swim in and out of PNG’s territorial waters over the next 30 years.

“It is well known in the industry that laterite plants are costly to build and must be managed well to make profits. The closure of Ravensthorpe and Cawse laterite operations in Western Australia are examples of recent failures in this industry sector. Indeed BHP Billiton spent US$2.8 billion to construct the Ravensthorpe plant only to close it eight months after opening and then recently to sell it for US$340 million.”

Mr Gooding noted that while it is true that MCC (the majority stakeholder) has managed to contain the construction costs of US$1.5 billion (K4 billion) within budget and at a figure significantly lower than other equivalent plants, the operating costs still remain and will limit the net returns from the project.

He added that these operating costs include reagent costs (e.g. sulphur), power generation fuel, transport, mining, maintenance, compliance, labour, shipping, marketing, management, royalty and refinery.

“Furthermore, it needs to be recognized that metal prices fluctuate widely between highs and lows. Any project of this size needs to be mindful of the periods of low metal prizes and its ability to repay outstanding loans during these periods. In addition to this risk, allowance needs to be made for increases in operating costs (e.g. fuel and sulphur), which further eat away at the net returns.”   

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