Tuesday, 7 July 2020
The PNG Mining Industry - Opportunities and Challenges
Austmine Limited
/ Categories: Press Releases

The PNG Mining Industry - Opportunities and Challenges

Papua New Guinea (PNG) has long been one of Australia’s closest partners in regional trade and politics due to the close geographical proximity between the nations. Australia is by far PNG’s largest trading partner, with Australia exporting over $2 billion in goods and services to the country in 2015 and importing about $3.5 billion in return. PNG’s top exports include gold, copper ore and crude petroleum, whilst it is a substantial importer of refined petroleum, excavation machinery and large construction vehicles. PNG’s reliance on the mining sector presents significant opportunities for Australian Mining Equipment, Technology and Services (METS) companies, who have the technical expertise and advanced equipment that can counter some of PNG’s most pressing issues such as its harsh climate and underdeveloped infrastructure. According to Austmine’s 2015 METS Sector Survey, Australian METS have acknowledged the opportunities in PNG, with 34% exporting their goods and services there.

As well as being South-Pacific neighbours, both economies share the similarity of being heavily reliant on their substantial endowments of natural resources; both nations were hit hard by the fall in commodity prices over the last few years. However, whilst PNG’s economic growth has been forecast to decline from 4.3% in 2016 to 2.4% in 2017, the mining sector is expected to remain the most influential source of growth, with the start-up of a few large mining projects. With reduced spending and tighter budgets, technology that is able to reduce costs and improve productivity will be key to the success and sustainability of PNG mine sites.

Since the 1970s, mineral extraction has become increasingly important to PNG’s economy and domestic employment.  The mining sector has been responsible for over one third of government tax revenue in recent years and has contributed to the development of rural communities to become economically self-sufficient.  This dependence on mining is highlighted by the increase in domestic employment in exploration, construction and extraction, growing from 12,000 people in 2004 to 30,000 people in 2010.

PNG predominantly mines gold, but is also home to a wide variety of metals, such as copper, rare earth metals, nickel, cobalt, chromium, iron and platinum. However, experts believe that there is still a vast wealth of resources left undiscovered due to rough and rugged terrain making exploitation difficult. PNG is home to some of the most significant mine sites and mining companies around the world, including the Hidden Valley gold and silver mine joint venture between Newcrest and Harmony Gold, Newcrest’s Lihir open-cut gold mine, the OK Tedi gold and copper mine, owned by the government and the Porgera Valley gold mine operated by Barrick Gold. The Grasberg gold mine in the nearby Papua province of Indonesia is predominantly owned by Freeport-McMoran. 

Whilst PNG presents good opportunities for Australian METS in terms of exporting and investment, it also provides many challenges. In a 2012 business environment survey, the most significant risks came from business security, government-business relationships, infrastructure and services, government regulations and policies, political uncertainty, supporting institutions and constraints to investment.

PNG is renowned for its harsh terrain and climate, being largely mountainous and covered with tropical rainforest, which has made it difficult to set up mine sites and establish infrastructure. The mountain ranges have prohibited the development of an extensive road network, isolating communities from Port Moresby and other major ports. Extreme weather conditions such as floods and storms are a normality and cause considerable damage to infrastructure. This has left less than 4% of the roads and airstrips paved in PNG and has contributed to a rail system being non-existent. The cost of construction and maintenance of roads has increased the cost of mine exploration in these areas, as equipment often has to be transported by alternate methods such as helicopter, with heli-portable drilling rigs being utilised in many parts of the country. However, due to PNG’s well established trade ties, shipping services are fairly comprehensively developed, having 17 ports across the coastline and operating over 250 regular freight services.

However, despite the challenges faced by the mining sector in PNG and the reduced growth outlook, the vast untapped mineral deposits have attracted miners from around the globe. Major mining projects expected to launch in the coming years include PanAust’s Freida copper-gold project, which is potentially as important to PNG as the OK Tedi mine was 35 years ago, the Wafi-Golpu copper-gold joint venture between Newcrest and Harmony Gold and Marengo Mining’s Yandera copper project. There are also set to be expansions and renewals of existing projects such as Ok Tedi and the Kainantu mine.

Regardless of how Australian METS approach these opportunities, relationships are crucial in PNG. David Knapton, Senior Trade Commissioner – PNG, Austrade, had some wise words for Australian METS pursuing opportunities in PNG and was optimistic about their prospects, stating “this is a market that looks for long term commitment and a willingness to build strong relationships. Australian companies with products, services and technologies that can address the issues faced by PNG mining companies will usually receive a good hearing.”   

It is essential that exporters or investors do their due diligence in weighing up potential options of agents and partners, as finding the right one will be a key to success. Institutions such as the Chamber of Commerce in PNG and Austrade can be a vital source of information, as well as a range of Australian legal and regulatory companies operating in PNG.

For a more in-depth analysis of the mining environment and opportunities in PNG, join Austmine on the 15th of June at 12:30PM AEST for our PNG Mining Market webinar. This will feature a panel of expert speakers who have built a wealth of experience in the PNG market and will be able to offer the most relevant and comprehensive insights into business practices and procedures and upcoming projects and opportunities.

Austmine will also be conducting an International Mining Mission to PNG later in the year. For more details about this, contact megan.edwards@austmine.com.au

Sources Used in this Article:

Department of Foreign Affairs and Trade – Papua New Guinea Country Profile - https://dfat.gov.au/trade/resources/Documents/png.pdf

PNG Chamber of Mines and Petroleum - http://pngchamberminpet.com.pg/

PNG Institute of National Affairs – 2012 Business Environment Survey Summary - http://www.adb.org/sites/default/files/publication/31209/challenges-doing-business-papua-new-guinea.pdf

written by Sheldon Varcoe, Membership Services Officer, Austmine

Print
5936
Previous Article Exporters to USA Receive Major Windfall
Return
Next Article Austmine-METS Ignited Agreement to Strengthen METS Sector

Theme picker

Austmine Programs

All Programs

Austmine Publications

All Publications

GET SOCIAL

SUBSCRIBE to our newsletter

Loading

Austmine

 

OZ METS Hub

WonderWebs.comTerms|Privacy|Copyright © 2020 Austmine | Mining Equipment, Technology and Services (METS) Sector
Back To Top