* Need for ports, power, roads raises costs
* Chinese banks boost miners' access to money
* Miners fear security risks, lenders undaunted
By Sonali Paul
SYDNEY, Dec 8 Planned changes to Papua New
Guinea's mining laws are creating uncertainty ahead of an
upcoming election, despite strong interest in proposed
multibillion dollar mining and energy projects in the Pacific
nation, lenders and advisers say.
The quality of the copper, gold and gas resources in the
country mean there is appetite to lend to projects including
Total SA's Papua liquefied natural gas project,
Guangdong Rising Assets Management's (GRAM) Frieda
River and Newcrest Mining and Harmony Gold's
Wafi Golpu copper and gold mines.
However Australia and New Zealand Banking Group and
Credit Suisse bankers said uncertainty over elections in
mid-2017 and proposed government mining and energy policies may
affect the size and pricing of loans.
Planned changes include shortening mine leases to 25 years
from 40 years, giving the state the right to acquire a project
for half its sunk cost after the first phase, an increase in
royalties to 3 percent and a doubling of the production levy to
PNG Prime Minister Peter O'Neill told a conference in Sydney
he would not go ahead with any changes to the mining law ahead
of national elections in June 2017, and would await a new
mandate in parliament.
But the uncertainty is putting pressure on the nation's
sovereign rating, which would affect lending terms.
"When we assess the risk and when we assign risk ratings to
projects, to the extent that the sovereign rating is under
pressure or downgraded, ultimately that translates to a higher
cost of funds to the borrower," said ANZ's head of mining and
resources infrastructure project and export finance Wai Mun Lum.
The PNG Chamber of Mines and Petroleum has warned that the
proposed mining law changes could make the Frieda River and Wafi
Golpu projects unviable.
The main attraction of Papua New Guinea is the sheer size of
the deposits, which are tucked away in remote, mountainous
regions with limited infrastructure.
"I talk to investment banks, and they're all keen to remain
on top of what's happening in PNG. They see the opportunities,
and they'll all be there," said Anthony Latimer, a partner at
law firm Norton Rose Fulbright on the conference sidelines.
But in a country where the only airport with runway lights
is in the capital, Port Moresby, lack of infrastructure poses a
big challenge. For a company like ExxonMobil building
the $19 billion PNG LNG project, a mammoth four-year task which
it likened to constructing on the moon, that was doable.
ANZ's Lum said for smaller companies like GRAM's PanAust
looking to build the Frieda River mine, it would be a bigger
challenge to fund port and power facilities and an air strip.
However where western bankers fear to tread, China's big
banks are pouring in, bankers and advisers said.
"The recent joint venture between Zijin and
Barrick for Porgera (gold mine) is going to be very
good for PNG," said Graham Smith, associate director of mining
M&A at KPMG.
"We're seeing the Chinese banks have a very different risk
appetite than some of the western banks for jurisdictions such
as PNG, as well as lower debt costs generally."
(Reporting by Sonali Paul; Editing by Richard Pullin)