Barrick Gold gets good news in Papua New Guinea

The Porgera gold mine in Papua New Guinea.

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By Peter Kennedy

Barrick Gold Corp. [ABX-TSX; GOLD-NYSE] received some good news on Thursday October 15 when Papua New Guinea Prime Minister James Marape said Barrick and its Chinese joint venture partner Zijin Mining can continue to operate the Porgera gold mine.

According to published reports, the announcement follows talks in Port Moresby, the Papua New Guinea capital, and coincides with the release today of Barrick’s third quarter 2020 production results, which were largely in line with expectations.

Barrick shares were virtually unchanged on the news, easing 0.86% or $0.32 to $36.89 on volume of 2.25 million. The shares are currently trading in a 52-week range of $41.09 and $17.52.

The Porgera Joint Venture is an open pit and underground gold mine located at an altitude of 2,200-2,600 metres in the Enga Province of Papua New Guinea, about 600 km north-west of Port Moresby. Proven and probable reserves at the site stand at 2.3 million ounces, with a further 3.6 million ounces and 1.2 million ounces listed in the measured and indicated, and inferred categories, respectively.

Last year, Porgera produced 284,000 ounces of gold at an all-in-sustaining cost of US$1,003 an ounce. But due to the dispute, Barrick has issued no production forecasts for the mine this year.

Barrick and Chinese partner Zijin Mining Group each own 47.5% of the Porgera mine. The remaining 5% interest is held by Mineral Resources Enga (owned jointly by Porgera Special Mining Lease landowners and the Enga Provincial Government).

Back in April, Marape had refused to extend the expired 20-year mining lease of operator Barrick (Niugini) Ltd. (BNL), citing environmental and social problems. BNL responded by vowing to challenge the purported grant of a special mining lease for the Porgera gold mine to a government-owned company.

It said the move by the Marape Government to purportedly grant a special mining lease to Kumul Minerals Holdings Ltd., a wholly state-owned enterprise, was tantamount to nationalization without due process.

Despite the fact that gold has traded close to all-time highs this year, BNL placed the mine in care and maintenance.

“We have agreed in principle that Papua New Guinea will take a major share of equity under the new arrangements and BNL will retain operatorship and there will be a fair sharing of the economic benefits,” Marape said in a joint statement issued after talks with Barrick Gold CEO Mark Bristow on reopening the mine.

Details of the joint statement are posted on a Scotiabank investment report, which links to a report out of Singapore by Reuters News Service.

It is not clear yet how large Papua New Guinea’s equity stake will be. Marape and Bristow have agreed to meet again in the coming weeks after negotiations have concluded. “I am certain that my team will be able to work with the PNG state negotiating team…in finalising full commercial details,” Bristow said.

Meanwhile, Barrick is on track to meet its 2020 production targets after reporting third quarter gold production of 1.15 million ounces at an all-in-sustaining cost of US$969 an ounce. The company also produced 119 million pounds of copper in the third quarter.

Barrick has previously said it expects to produce 4.6 to 5.0 million ounces of gold in 2020 at an all-in-sustaining cost of US$920-US$970 an ounce. Copper production this year is forecast at 440-500 million pounds.


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