2010 is proving to be another year of positive development leading to the re-commencement of operations at the Panguna mine, owned and previously operated by Bougainville Copper Limited.
With copper reserves estimated at almost 3 million tonnes and gold production in the range of 400,000 ounces per annum, Panguna is one of the worlds largest potential producers of both metals. Unexplored neighbouring tenements are also very prospective, and will be explored when a moratorium on exploration is lifted.
Present market values for both copper and gold are significantly higher than at the time of mine closure in 1990. The political situation within the Autonomous Bougainville Region has stabilised, and there is considerable appetite for development being expressed by the people. BCL is seen by many as the preferred operator of a re-started mine, and holds a very large bank of mine data.
The Board is operating a comprehensive rolling plan with the vision of returning to active exploration and profitable mining.
Recent events
In July, BCL offered its congratulations to the newly elected President of the Autonomous Bougainville Region, John Momis, and assured him of the companys willingness to contribute in appropriate ways to economic development in the region, to the benefit of the people of Bougainville and the companys shareholders.
President Momis has indicated his preparedness to see the Panguna mine re-opened, with BCL as operator, provided the assent and involvement of local landowners is achieved. The President has further said that it was his belief that landowners at Panguna and elsewhere were generally committed to the re-start process.
It is expected that the Bougainville Copper Agreement re-negotiation will be actively pursued towards the end of 2010, with all sides committed to making significant progress. At the August meeting of the Joint Supervisory Body, principal agency implementing the Bougainville Peace Process, re-negotiation of the BCA was placed on the formal agenda, for immediate progress.
If the main stakeholders are to gain mutual economic benefit from Bougainville's mineral potential a framework such as a re-negotiated BCA needs to be in place. Variations in copper and gold prices indicate that opportunities need to be taken up without undue delay.
Positive factors
Work continued evaluating the comprehensive Order of Magnitude study commissioned by BCL in 2008.
The OOM Study makes assumptions about the size of a re-started mining operation, based on a re-processing of the data base, and taking into account the existing assets including the port at Loloho and the port-mine access road.
An important component in achieving the vision will be an environmental plan that is not only based on best practice but also meets the expectations of the local community. Work will continue to identify the key issues and solutions. Secure access to the mine site and surrounding areas of previous operations will be welcomed, to assist the environmental assessment and future planning.
The company has made known to both the Autonomous Bougainville Government and the National Government of Papua New Guinea its willingness to conduct safety and environmental audits on the island as soon as access can be facilitated.
Other issues
Other issues in focus include the resolution of a taxation issue, and a mine asset stock take. Existing mine assets have not until now been accessible to the company, and to understand the present value of these assets and the extent to which they may be used for future mining and exploration, access to the mine site is needed. For this BCL welcomes the support expressed by local landowners and will continue to work alongside them, and give practical assistance to the processes of reconciliation and social stability. BCL welcomes the growing consensus of landowner support for resumed exploration and mining, expressed in regular dialogue with landowner leaders.
During the year more work has been undertaken in preparation for the possible lifting of the moratorium on new exploration and mining. It is intended to identify targets within the company licences and how best to manage an exploration program. That may involve entering into an exploration agreement with others. Work will also continue to ensure that the extensive mine database is able to be utilised quickly and effectively if a return to mining at Panguna is agreed.
BCL works closely with the PNG Mineral Resources Authority (MRA), which acts as a statutory authority managing and regulating the industry. The company expects that the Authority will play an active and guiding role in facilitating the Bougainville Copper Agreement re-negotiation, and a number of studies will be undertaken in preparation for negotiations. The company is also in regular touch with the National Government of Papua New Guinea at a high level.
The second half of 2010
The company remains focussed on preparing for a formal engagement with landowners and the National and Bougainville Government over the future of the mine and settling all outstanding issues between the parties.
The Autonomous Bougainville Government and the body representing the PNG National Government on Bougainville Affairs have indicated their willingness to participate in such talks.
All parties have agreed that it is necessary to maintain a landowner group that can represent all landowner interests during negotiations. The Bougainville Government is taking the lead and the company has offered its assistance where appropriate.
Bougainville Copper Limited (BCL) is owned 53.58% by Rio Tinto Limited. The Papua New Guinea Government owns 19.06% while public shareholders hold the remaining 27.36% of the share capital
BOC Price at posting:
$1.65 Sentiment: ST Buy Disclosure: Held
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