EXPLORATION ’95 — Papua New Guinea primed to reclaim status

In the mid-to-late 1980s, the mineral potential of Papua New Guinea (PNG) captured the imagination of exploration companies in Australia and elsewhere. Indeed, at one point, more than 18% of the country’s land mass was covered by mining claims.

Today, however, only a few well-funded, far-sighted companies are making an effort to seek out mineral deposits, and many of these are hoping to capitalize on the work of previous operators.

From 1984 until the market crash of 1987, it seemed one had only to mention “epithermal gold up north,” and investment dollars from Melbourne became readily available. (The fever did not reach the west coast of Canada, however, perhaps because the investment community there was, at the time, preoccupied with Nevada and with the Eskay Creek play in British Columbia.) Since that period, the focus of international exploration has shifted to Latin America, Indonesia and West Africa.

Yet the spectre of political unrest continues to loom in many of those districts (especially in countries such as Peru and Argentina), and the cost of entering them is rapidly increasing. Little opportunity is available for the modestly funded junior to acquire a reasonable property at a reasonable cost.

As a result, exploration companies are, once again, coming to regard PNG as an alternative area of mineral potential.

The country’s mining laws have recently been revised and updated, and the government is known for taking a pragmatic attitude toward environmental regulation. Moreover, the area hosts the largest known gold reserve outside of South Africa (the Lihir deposit) and one of the world’s largest gold mines (Porgera, which produced its five-millionth ounce last November). Two smaller gold mines, Tolakamu (near Port Moresby) and Wapolu (off the southeastern coast), are expected to come on-stream in 1995.

During recent years, the PNG government insisted on taking an equity stake in new mining projects. Today, however, a different strategy is in effect; finding itself strapped for cash, the island nation is seeking to sell its interest in such large-scale deposits as Porgera and Ok Tedi. The new policy, which was announced last December by Prime Minister Julius Chan, has the backing of the International Finance Corporation, which is helping PNG resolve its deficit problems.

Expectations are running high for the newly elected Chan, who is known for the pragmatism he exhibited as finance minister. The previous prime minister, Paias Wingti, has been criticized for mismanaging the Bougainville “crisis” (in which local landowners forced the closure of a mining operation) and for lowering the nation’s international standing by forcibly negotiating to increase PNG’s stake in the rich Porgera mine. With Chan’s electoral win, this negotiation is now likely to be reversed.

And so, with a new government headed by an able prime minister and with new policies designed to encourage exploration, PNG is poised to resume its status as being a “hot spot” in the search for mineral wealth. That the country still holds an attraction to the exploration sector is evinced by the recent purchase by Vengold (TSE) of a 10% interest in Lihir. Other companies with interests in PNG include Placer Dome (TSE), Newmont (NYSE), Niugini Mining, Mount Isa Mines and RTZ (NYSE) — all major players in the world of mining.

Also, Pallaum Minerals (ASE) has announced that it intends to explore five large prospecting licences in the country. The junior is at a distinct advantage in having, as its president and major shareholder, Peter Macnab, who played a primary role in the discovery of Lihir and Misima. He may now be set to find his third major deposit in PNG.

— The author is an independent consultant based in Scottsdale, Ariz.