China’s $3.6 Billion PNG Copper Mine Faces 2-Year Approval Wait

  • PanAust plan sees doubling of cost of Frieda River project
  • Mining industry preparing for a forecast copper shortfall

China-owned PanAust Ltd. estimates it may take as long as two years to win approvals for its expanded $3.6 billion copper project in Papua New Guinea as bigger rivals forecast a deficit of the metal by the decade’s end.

A revised development plan for the Frieda River project by state-owned Guangdong Rising Assets Management Co.’s Australian unit more than doubled an earlier cost estimate following a better understanding of the earthworks required, PanAust General Manager of Corporate Development Joe Walsh said Thursday in a phone interview. The new study also raised forecasts for copper output about 40 percent to 175,000 metric tons a year.

“Commodity prices are, in our view, going through a cyclical low and we do envisage that in the fullness of time we will see prices recover,” Walsh said. “The focus over the next year or two, when we would envisage that we would be largely in an approvals process, is to look at opportunities to improve the fundamentals of the project, with a particular focus on capital and infrastructure.”

China is stepping up a hunt to secure more supplies of copper through acquisitions and mine projects to prepare for the forecast long-term demand growth. A copper deficit is likely to develop toward the end of the decade, BHP Billiton Ltd. said in February, as output is constrained at existing mines on lower grades.

Multiple Pathways

Frieda River, acquired from Glencore Plc in 2013, may contain as much as 12 million tons of copper and 19 million ounces of gold, Brisbane-based PanAust said Thursday in a statement on its website. A further $2.3 billion is earmarked in the new plan for sustaining capital and development over the life of the mine, it said.

The mine will also deliver average annual production of 250,000 ounces of gold over the initial 17 years, PanAust said, compared with 200,000 ounces under a September 2014 proposal.

PanAust’s study didn’t include any forecast date for Frieda River to enter production. The project remains subject to permits, approvals and a final investment decision by Guangdong and partner Highlands Pacific Ltd., which has a 20 percent stake, PanAust said in its statement. Guangdong last year completed a takeover of PanAust with an offer that valued the producer at about A$1.2 billion ($870 million).

“It’s not really possible to put a clear timeframe on this,” Walsh said. “History would suggest that approvals processes for substantial projects in PNG tend to be quite drawn out.” The partners will seek a special mining lease from the Papua New Guinea government by June 30.

Earlier this month, China Molybdenum Co. agreed to pay $2.65 billion for Freeport-McMoRan Inc.’s Tenke copper and cobalt mine in the Democratic Republic of Congo, adding metals to feed China’s new growth phase. Rio Tinto Group this month approved a $5.3 billion expansion to more than double output at Mongolia’s Oyu Tolgoi copper mine, situated 80 kilometers (50 miles) north of the Chinese border, aimed at meeting demand from the top consumer.

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