China’s Zijin Mining Seeks Gold Elsewhere After Losing Papua New Guinea Mine
Zijin Mining, China’s largest gold producer, may face a drop in production with the loss of operating rights at a gold mine in Papua New Guinea, further denting profits amid the Covid-19 pandemic.
Papua New Guinea’s government said Friday it will take control of the Porgera gold mine after refusing to extend the lease of Zijin’s local joint venture, Barrick Niugini Ltd.
Zijin owns 47.5% of the mine, which contributes about 8 tons of gold annually to Zijin’s total production and generated 12.3% of net profit last year.
Without the Porgera mine and amid the fallout of the Covid-19 pandemic, Zijin’s 2020 gold production is expected to decline by 37 tons, or 9.3%, from 2019, Dongxing Securities Co. said in a report.
The gold producer said it planned to accelerate the upgrade and construction of its Longnan Zijin project in China and boost production at other mines in its portfolio to offset the loss of Porgera.
The company’s Shanghai-listed shares were battered by the news Monday, almost hitting the 10% daily loss limit. The stock recouped part of the decline Tuesday, but its Hong Kong-listed H shares dropped further by 3.32%.
Zijin invested $298 million in 2015 to acquire the stake in Barrick Niugini, which is jointly owned by Zijin and Canadian gold giant Barrick Gold. Zijin said it has recouped the entire investment cost of the project.
Barrick Niugini’s special mining lease for the Porgera gold mine was first approved in 1989 and expired last August. Barrick had attempted to renew the lease but faced backlash from landowners and residents over what they said were negative social, environmental and economic impacts from the mine.
After refusing to extend the lease, Papua New Guinea’s government said its negotiation team would discuss follow-up matters with the current operator of the mine. But Barrick Gold said it had no interest in discussing transitional arrangements as proposed by the government.
The government’s decision was “tantamount to nationalization without due process and in violation of the government’s legal obligations to Barrick Niugini,” Barrick Gold said Friday in a statement. The Canadian company said it will pursue all legal avenues to challenge the government’s decision and to recover damages.
Barrick Gold also disputed the government’s allegations of environmental damage and resettlement issues as reasons for the nonextension. The company said environmental practices at the mine were regularly audited and approved by the government, and the company has compensated and relocated more than 1,400 households affected by the mine.
Zijin cited Barrick Gold’s position in its statement Monday, adding that it will actively seek legal and reasonable solutions.
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