April 24, 2020 / 9:15 AM / 3 months ago

UPDATE 3-Papua New Guinea to take control of Barrick Gold mine

* Govt refuses 20-year extension to lease that expired in August

* PNG plans to operate the high-margin mine itself

* Local groups say they have no regular access to clean water

* Barrick says refusal of new lease tantamount to nationalisation (Adds Barrick JV comment)

By Tom Westbrook and Melanie Burton

SINGAPORE/MELBOURNE, April 24 (Reuters) - Papua New Guinea’s government will take control of the Porgera gold mine after refusing to extend Barrick Gold Corp’s lease over the facility, citing environmental concerns, Prime Minister James Marape said on Friday.

The decision ends months of uncertainty since the lease over the troubled project expired last August, and may end Barrick’s hopes of boosting output from a mine it said held potential as a long-life and high-margin asset.

Marape took power a year ago on a platform of economic nationalism that would review more closely its mineral resource assets, and comes as pressure rises on miners globally to improve their social and environmental responsibilities.

Marape said his government accepted a recommendation from the country’s Mining Advisory Committee to refuse Barrick’s 20-year lease extension application owing to environmental and social problems connected to the mine.

“We are now going through transitional arrangements ... and once the transition phase has been completed, then the state will enter into owning and operating the mine,” Marape told reporters in the capital of Port Moresby.

“The state has every right to refuse the lease, or to extend the lease, and in this instance, because of the environmental issues, resettlement issues and many, many other legacy issues ... the state has now refused the lease to Porgera.”

Barrick (Niugini) Ltd, which manages Porgera as a joint venture with China’s Zijin Mining said it had “no interest in discussing transitional arrangements for the management of the mine,” since it believed the country’s High Court had awarded it a right to extension in August 2019.

It said the government decision was “tantamount to nationalisation without due process and in violation of the government’s legal obligations to BNL.”

It also said it would “pursue all legal avenues” to challenge the government’s decision and to recover any damages.

Marape gave no timeframe for assuming control of the mine, nor any financial details over whether or what the state might pay for it.

NO CLEAN WATER

Porgera is located in Papua New Guinea’s remote highlands, and has been plagued by poor security and accusations that it has polluted the local water supply.

BNL said last month at least nine people, including women and children, were killed during an outbreak of violence in the area, where locals with little other form of income often informally look for gold. It also said it complies with the government’s environmental regulation.

Porgera produced about 421,500 ounces of gold in 2018 and in January Barrick was mulling elevating it to “tier one” status, which it reserves for mines capable of producing half a million ounces cheaply for a decade.

Groups representing local landowners could not be immediately reached for comment.

Porgera is just one of several large and lucrative extractive projects on the drawing board in Papua New Guinea when Marape took charge.

His government has since talked a hard line and in February walked away from negotiations with Exxon Mobil Corp over a large gas field deal.

Marape said Exxon’s project, called P’nyang, a related gas project led by France’s Total, called Papua LNG, and Newcrest Mining’s Wafi Golpu gold and copper project would be advanced “within the ambit of present legislation”.

Australia’s Newcrest said his mention of Golpu as a priority project was reassuring. Exxon declined to comment, beyond saying it was “hopeful that we can continue to work toward an outcome that benefits all stakeholders”. A Total spokesman in Papua New Guinea declined to comment. (Reporting by Melanie Burton in Melbourne and Tom Westbrook in Singapore; Editing by Susan Fenton, David Evans and Louise Heavens)

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