Rio Tinto (RTP) has a majority holding in mining company Bougainville Copper, who owns the now defunct Panguna mine, one of the worlds largest copper reserves. Closed down since 1989, the decision to re-open the mine could now be around the corner.
Bougainville is a small island in the pacific. It is home to the Panguna mine, closed down in 1989 during a civil war. It is key to know that the remaining copper reserves in the ground could be mined for at least another 35 years. This is what has now caught the investor communitys interest.
One mine, several profiteers
Several developments suggest that the decision to re-open the mine could be made before the end of this year. Such a decision would be of great interest to Rio Tinto, who owns 53.8% stake in Bougainville Copper. Approximately 19.1% is owned by the government of Papua New Guinea, whose government also favors the re-opening of the mine. Bougainvilles president, John Momis, agrees. He knows that the re-opening of the mine would create the jobs and the welfare for his island population.
High return on investment
It is key to know, that apart from Panguna, Bougainville Copper has secured additional mining rights for 7 other areas on Bougainville, says Axel. G. Sturm, President of the European Shareholders of Bougainville Copper a representation of investors in BCL, owning over 4% of the companys shares. Sturm is convinced the companys future is bright. And justifiably so! In the 80ies, Bougainville Copper had one of the lowest production costs worldwide. Take this and see copper prices significantly higher today and you can imagine the mines potential ROI. However, before production can start necessary investments in infrastructure need to be made. Improving the infrastructure will take 3 to 4 years and will cost around USD 1.5bn, says Sturm. He believes that the World Bank could play an active role in financing the project.
BOC Price at posting:
90.0¢ Sentiment: ST Buy Disclosure: Held
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