Mar 1, 2010

Mining tracks ahead in PNG

PAPUA NEW GUINEA is continuing to be at the forefront of exciting developments in the mining and resources industries, building a strong framework for future growth within the nation.

Kina Securities CEO Syd Yates said despite the slower recovery in the US and European economies, key sectors of the global economy are moving in full swing to ensure supply chains for resources are available.

"Record results delivered by global mining companies working in PNG have continued to send a timely message to the world that there are strong development and exploration opportunities within the Nation. With the global economy continuing to show signs of a recovery, this message becomes all the more important.

"However, there unfortunately continues to be negative issues raised in the local and international media concerning site and location disruptions, which again reflect poorly on the prospects of the nation," Mr Yates said in the company's Kina Communiqué'

Last week Papua New Guinea ranked poorly as a place to invest in mining by the New York-based mining consultancy company Beare Dolbear.

Beare Dolbear's "2010 Where NOT to Invest" report ranked PNG in 21st place out of 25 major mining countries.

It ranked PNG in the bottom group of countries according to the way it handles social issues such as poverty, in the second bottom group on mine permitting delays, and near the bottom on corruption.

Global gold producer Lihir Gold Limited recently announced it had delivered a record underlying profit of US$290 million for the year ending 31 December 2009. This reflected a significant increase of 57 per cent when compared to the previous year's activities.

The company indicated the strong result was primarily due to the group achieving the major milestone of producing and selling more than one million ounces of gold in a year, combined with reduced unit costs and strong gold prices.

Lihir Gold chief executive officer Phil Baker said that a record performance from the Lihir Island operation in PNG and a full year's contribution from the Bonikro and Mt Rawdon assets acquired in mid-2008 had also enabled the solid underlying profit result.

However, the company also reported $413 million in impairment charges and operational losses associated with its Ballarat operation, leading to an overall loss of $234 million.

Despite this, Mr. Baker said the company had achieved a number of strong results throughout the year.

"The excellent production outcome of 1.12 million ounces for the year, together with rising gold prices, translated into record revenues for the company. For the first time in LGL's history, total revenues surpassed US$1 billion," Mr. Baker said.

"The record performance at Lihir Island has confirmed the significant progress we've made in our drive for operational excellence and cost competitiveness," he said.

Clearly the global hunger for resources continues to excite exploration and new development opportunities throughout PNG. This has been reflected by ongoing developments of the LNG pipeline and other key projects throughout the Nation.

Earlier this year international mining organisation Nautilus Minerals announced that it had officially received the final Environmental Permit for the development of its Solwara 1 Project for the next 25 years, expiring 2035.

This historic announcement takes PNG yet another step closer to successfully hosting the world's first undersea copper and gold mining operation. The milestone also symbolises the start of an exciting new era for the global mining industry, which is now benefiting from the development of innovative techniques designed to collect valuable minerals from depths of more than 1,500 metres under the sea.

Throughout the past decade, the Nation's mining and natural resources sector has developed into a genuine cornerstone of the domestic economy.

Importantly the industry is continuing to provide strong opportunities for growth and development which will become all the more important as the global economic recovery continues to take effect.

A strong and diverse mining industry is integral to a prosperous national economy, with the sector creating many productive investment opportunities across PNG and generating numerous flow-on employment options for locals.

PNG's mining sector is now being recognised internationally as a diverse and well-managed sector and the positive benefits of this will continue to emerge for years to come.

Horizon gets PNG, Maari boost

THE sale of a 50 percent stake in PRL 4 in Papua New Guinea and the production start-up from the OMV-operated Maari oil field in New Zealand has had a huge impact on Horizon Oil's balance sheet.

According to PNG Industry news, Horizon posted a net profit of $US56.6 million (K155 million) for the half-year ended December 31, 2009, due to a $US54.1 million (K148 million) gain on the sale of the stake in Petroleum Retention License (PRL) 4 to Talisman Energy.

This compares with the net profit of $US1.9 million (K5.2 million) made in the half-year ending June 30, 2009.

Revenues were also up 200 percent to $US24.4 million (K67 million) over the same period as production climbed from 164,444 barrels of oil to 403,302bbl.

Horizon said planning for drilling of the Stanley-2 and Elevala-2 wells in PRL 4 and 5 respectively was progressing well, with Stanley-2 scheduled to spud in the third quarter of 2010.

More gas on the cards for Oil Search

OIL Search plans to focus 2010 exploration efforts on finding more gas to underpin liquefied natural gas expansion in Papua New Guinea and expects to resolve the remaining issues for PNG LNG this quarter reports PNG Industry news.

Managing director Peter Botten said in a statement key exploration activities this year included drilling the Wasuma, Korka and Mananda Attic wells, as well as onshore and offshore seismic in Southern Highlands province.

He added the company would also continue its seismic and drilling program in the Middle East and North Africa.

While development activities will focus on gas conservation and improving facilities, infrastructure reliability as well as extending facility life to support the PNG LNG project, Oil Search is still looking to get the most out of its oil assets.

This includes drilling one or two development wells on the Moran field; appraising the Agogo deep play, which had encountered oil in several intervals in a previously untested footwall forelimb compartment; and carrying out a workover campaign in the Kutubu, Moran and SE Gobe fields.

Botten said the new deep intervals at Agogo will be flow tested to determine hydrocarbon content, reservoir productivity and the potential for further development opportunities.

"Importantly, the discovery of oil in the Agogo footwall forelimb has opened up a new play fairway in the Fold Belt and has significant implications for the development of analogous structures below existing fields and the prospectivity on trend in adjacent licences."

Botten also touched on progress for the PNG LNG project.

"The remaining issues to financial close, including the signing of the final SPA (sales purchase agreement), which will result in the PNG LNG plant's initial capacity being fully contracted, are expected to be resolved during the first quarter of 2010 with first draw-downs from the project financing facility expected shortly before financial close," he said.

Meanwhile, Oil Search reiterated that full-year 2010 production would be about 10 percent lower than in 2009 at 7.2-7.4 million barrels of oil equivalent.

The company posted a net profit after tax of $US133.7 million (K367 million) for 2009, down from $US313.4 million (K860 million) in 2008, due to lower production and lower oil prices.

Revenue for the year was down 37 percent from 2008 to $US512.2 million (K1.4 billion) while production was 5 percent lower to 8.1MMboe, due to natural decline at its mature PNG oil fields, facilities downtime and the sale of the Middle East producing assets in May 2008.