Barrick Gold battles with Papua New Guinea's citizens and government

Barrick Gold forges ahead on Papua New Guinea mine in face of local backlash

Critics say the Porgera mine has polluted the water supply and created other
environmental and social problems, with minimal economic returns for locals

by Jeff Lewis and Melanie Burton

Reuters

January 16, 2020

TORONTO/MELBOURNE — Barrick Gold Corp. is set to elevate its troubled Papua New
Guinea mine to its top-tier assets, despite landowner and government demands to cede
a larger stake and deteriorating security at the joint venture with China’s Zijin
Mining

With a 20-year lease renewal application in the balance, Barrick has faced backlash
from Papua New Guinea (PNG) landowners and residents. Critics say the Porgera mine
has polluted the water supply and created other environmental and social problems,
with minimal economic returns for locals.

Seven people have died at the Porgera mine since September, including three
so-called illegal miners last month in clashes that prompted Barrick’s local entity
to appeal for government intervention.

Barrick hopes to boost the mine’s production by 18 per cent or more. This previously
unreported outlook raises the stakes for Prime Minister James Marape’s government,
which has been seeking richer terms from miners and oil and gas producers.

The head of the country’s mining regulator said Barrick, the world’s No. 2 gold
miner, is waiting to begin serious negotiations for permit renewal terms with the
country’s executive council, led by Marape.

“If we can renew the permit on a reasonable basis, it stands up as a tier one
asset,” Barrick Chief Executive Officer Mark Bristow told Reuters, referring to a
large scale, long-life, high margin deposit.

PNG’s next steps with Barrick could influence billions of dollars of planned
investment by global miners including Australia’s Newcrest Mining and St Barbara,
who are eyeing new mines or mine extensions, but are wary of rising sovereign risk.

Miners, facing a dearth of new deposits and rising resource nationalism, may now
have to cede greater rewards to other stakeholders.

“There will have to be equitable sharing of the spoils or these things won’t be
developed or will be discontinued, ultimately,” said portfolio manager Simon
Mawhinney, at Allan Gray in Sydney who is among Newcrest’s biggest investors.

Barrick’s tier-one designation, used describe a mine capable of producing
500,000 ounces of gold annually for at least 10 years at low cost, would place
Porgera in league with Barrick’s crown jewel assets at a time major gold miners are
desperate to replace shrinking reserves.

Barrick and Zijin’s combined 2018 production at Porgera was around 421,500 ounces.

ENVIRONMENTAL ISSUES

Barrick has broadened the role of its top China executive and former U.S.
diplomat Woo Lee to handle day-to-day talks with the PNG government. It has pledged
to relocate villagers whose land the mine has swallowed and study ways to improve
management of mine waste currently dumped in rivers, Bristow said.

The moves, aimed at mollifying concerns over access to arable land and pollution of
local waterways, may not be enough to satisfy landowners and the PNG government who
want a larger equity stake.

Barrick and Zijin each own 47.5 per cent of the mine, with the remaining 5 per cent
held by landowner group, Mineral Resources Enga.

Analysts have said Barrick could opt to put its stake on the block with other assets
it has shed to meet a US$1.5 billion divestment target. But Bristow played down a
potential sale, saying Porgera fits Barrick’s investment criteria.

“It makes real returns, it creates value, it can survive the cyclicality of the gold
industry and will make a significant contribution to our other stakeholders,” he
said.

Barrick’s top executive has shown he is willing to make concessions to settle
disputes. In October, Barrick agreed to sell Tanzania a 16 per cent stake in each of
its Bulyanhulu, North Mara and Buzwagi mines to resolve a long-running fight over
taxes.

The Canadian miner may face added pressure to confront issues in PNG that run afoul
of investor benchmarks on environmental, social and governance issues.

Citi, for example, has pledged not to support mining companies who use riverine
tailings disposal which an NGO said in a 2019 report had polluted the rivers and
denied locals reliable drinking sources.

Maso Mangape of the Porgera Land Owners Association said local residents had been
squeezed out. “The mine site has now become a battlefield,” he said.

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