FEATURE-Jungle gold mine could rescue troubled Solomons11:01,...

FEATURE-Jungle gold mine could rescue troubled Solomons
11:01, Wednesday, 3 May 2006

By Michelle Nichols

HONIARA, May 3 (Reuters) -

An abandoned gold mine in a jungle
in the Solomon Islands, one of the richest veins in the South
Pacific but shut due to ethnic violence, could be a lifeline for
the troubled nation.

The government hopes the Gold Ridge mine, expected to resume
gold production by end-2007, could spark vital investment and
create jobs in an impoverished nation where just 9 percent of
people are formally employed.

Finance Minister Peter Boyers said the youth of the Solomons,
half the island's 500,000-strong population, need a future if the
chain of 992 islands is to end the cycle of instability.

"These youth want a vision and some sort of hope that they
are going to have a future, whether it's formal or informal --
it's our responsibility to create it," Boyers told Reuters in an
interview at parliament house in the capital, Honiara.

Companies such as Japan's Sumitomo Metal Mining had shown
interest in nickel and cobalt exploration, he said.

For most of this decade, political risk has plagued the
Solomons, a nation with rich gold veins, possible offshore oil
and gas, and nickel and cobalt deposits hidden under its jungles.

A new prime minister is to be chosen in a secret ballot in
parliament on Thursday, after the election of deputy prime
minister Snyder Rini as leader sparked riots, fuelled by rumours
that his government was influenced by local Chinese businessmen.

Rini resigned after days of riots targeting the tiny Chinese
business community in Honiara, but leaving foreign troops and
police patrolling the streets -- an image the Solomons fears will
hinder foreign investment.

The political instability has continued since April when
voters ousted half the parliament in a national election
dominated by corruption, expecting a new government to emerge.

The Solomons was rocked by a coup in 2000 and was on the
brink of bankruptcy and collapse in 2003 due to ethnic fighting,
forcing neighbouring South Pacific nations to send peacekeepers.

Peace was restored, but there was little economic recovery in
the past three years, leaving many in the 500,000 population
angry at what they see as continuing political corruption.


JUNGLE MINE

Dense lantana weeds cover rusted earth-moving equipment at
the Gold Ridge mine, an hour and a half's drive from Honiara.

Worker camps and tool sheds are barely visible through the
dense tropical foliage. Only a handful of squatters now pan the
pitted moonscape in search of gold dust.

Australian Solomons Gold (ASG) was granted rights to
rehabilitate the mine two years ago. The company's chief
operating officer, Mike Christie, said there had been delays to
the project, the price of doing business in the Solomons.

When ASG, about 40 percent owned by Australian miner
Michelago Ltd., completed the ownership deal for the mine in May
last year, the company had aimed to be producing gold by the end
of 2006, but that target has now been pushed back a year.

Before the warring factions in the province overran the mine
and chased workers off with machetes in 2000, Gold Ridge was
yielding 150,000 ounces of gold annually, making it one of the
biggest lodes in the region behind neighbouring Papua New Guinea.

ASG plans to mine about 120,000 ounces of gold annually when
it starts operations late next year.

Gold bullion sells for as much as $636 an ounce on exchanges
half a world away in New York and London, more than double the
bullion price when the mine closed six years ago.

Boyers said the Solomons, which relies on aid for 70 percent
of its budget, has worked hard to restart the mine, offering tax
and duty exemptions.

"We're basically going to lose a considerable amount of
revenue through that," said Boyers, declining to give a specific
figure. "But that's a sacrifice the government's taking to get
that industry moving in the hope that further mines might open."

Australian Solomons Gold, which plans to list on the
Australian Stock Exchange with an initial public offering by
mid-2006, hopes to employ up to 600 people at Gold Ridge.

Christie said three percent of the expected annual revenue
from Gold Ridge of SB$600 million ($78 million) would be split
between the government and local landowners.

"You don't have to go too far out of Honiara to find there's
little or no clean water supply. Sanitation is an issue, along
with schools, and road transport," Christie told Reuters.

"Gold Ridge can set an example in which projects can invest
and prosper in the Solomon Islands and in such a way that the
benefits are shared," he said.

($1=SB$7.60)
((SOLOMONS-GOLD; Editing by Michael Perry and Jim Regan and
Sanjeev Miglani; [email protected]; Reuters Messaging:
[email protected]))

(c) Reuters Limited 2006
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