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PNG mineral revenue forecast 2017

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Total mineral revenue from large scale and alluvial mining for the 2017 calendar year is forecast to be about K11 billion, according to the Mineral Resources Authority (MRA).

This figure is based on monthly reporting up to August 2017.

This revenue is the result of continued overall increases in mineral commodity prices, production and ore exports.

An 11 billion mining sector revenue outcome will represent an increase of 13.4% against 2016 mineral revenue. More importantly it will underpin an ongoing upward trend in mineral receipts, which will boost the economy.

All major mines and alluvial miners contribute to this outcome. Gold, silver and copper production at Ok Tedi is ahead of 2016 figures ( based on only 10 months production), and forecasts indicate a 2017 end of year outturn of an additional K700 million, with revenue potentially exceeding K2.7 billion.

Lihir is also turning in another solid performance and revenue forecasts indicate an increase on 2016 of around K200 million exceeding K3.7 billion for the full year. Production forecasts indicate that Lihir may produce around 950,000 oz, closing on its 1 million ounce production target in the calendar year. This would be an impressive turnaround and achievement, emphasising its credentials as a world top 5 gold mine aspirant, by production, and consistently rated as 3rd globally for its ore reserves.

Whilst the Ramu operations still continue to suffer from regulatory and compliance issues, 2017 production has improved and could exceed 2016’s disruptive year by K300 million.

While gold still represents an ‘unhealthy’ 68.75% of PNG mineral revenue, this percentage has been whittled away by the increase in copper, nickel and cobalt providing that widening of the mineral base. The gold price has again fluctuated wildly with a recent spike on the back of international tensions surrounding North Korea’s nuclear ambitions, hitting over $USD1340 early in September, only to have now dropped back below $USD1290. Copper, nickel and cobalt have also continued to rise erratically in recent months with copper hitting a 52 week high of $USD3.13/lb in September.

The newly re-opened Kainantu mine has achieved a milestone with its first concentrate shipments receiving export approval in July – revenue is estimated at over K8 million from the first two shipments. Unfortunately the mine suffered a significant setback with illegal damage caused by landowners and this will take some months to recover from. These incidents are unfortunate as they directly impact investor sentiment in our sector and PNG generally.

Simberi, despite moving towards closure next year coincident with the expiry of their Mining Lease, has also continued to improve production and revenue in 2017. Porgera and the alluvial sector are maintaining reasonably steady positions, while Hidden Valley mine has entered its temporary closure phase as it prepares for its next development stage.

Loss of revenue during this period will hopefully be made up by Kainantu once they return to production. The Tolukuma mine remains problematic as they struggle with tenement and regulatory issues as well as funding, all of which is hindering a return to production under new owners Asidokona. Crater Mountain mine is also afflicted by financial difficulties with the failure of a capital raising, but it is hoped that Board and management changes will finally see some positive results from this small operation shortly.

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