Rio may look to re-enter PNG: analyst

Rio may look to re-enter PNG: analyst

by Jesse Riseborough

28th March 2006

WITH the resumption of any mining and exploration activity on Bougainville remaining in limbo, Rio Tinto may be looking to re-enter PNG to take advantage of the country's geological prospectivity as well as current record highs being experienced by commodity prices, a leading analyst said.

"It is in a part of the world that does have the potential to host world-class deposits and I think that is what of interest to companies of that size and also we have seen the Chinese becoming very active in terms of farming into projects," Gavin Wendt of Fat Prophets told PNGIndustryNews.net.

Wendt said given Rio's level of expertise in copper, the number of porphyry-style copper targets made PNG a likely destination.

"I would have to think that potentially they [Rio] are looking at some involvement in PNG with the driving factor being the fundamentals for copper are very strong – PNG is host to numerous porphyry-style copper deposits.

"PNG from an exploration point of view probably still has a number of undiscovered deposits waiting to be found and I think that is probably what is of interest to Rio Tinto. The fact there is the potential for world-class ore bodies, in particular with a copper flavour, and it is obviously a metal that Rio Tinto has a major presence in."

Speculation surrounding Rio Tinto and PNG has increased after it was revealed last week the country's Mines Minister Sam Akoitai had met with Rio Tinto chief executive of copper and exploration Tom Albanese in London.

News of the meeting also sparked market interest in Bougainville Copper, within which Rio holds a majority stake, and its shelved Panguna copper-gold operation.

Wendt said any decision on Panguna or Bougainville was a long way off and was pure speculation at this point.

"I guess a lot of it has been speculation, we don't exactly know what is going to happen. Certainly the potential is there – the prospects are better than they have been for a few decades," he said.

"I think at the end of the day before they make a firm decision they would want to get on the ground – they want to have surety they could resume mining or at least get back on the ground without trouble reigniting.

"They have made the comment before that there is not much they can salvage out of the operation. Potentially they are looking at a possible cost somewhere in the vicinity of $A1 billion to restart operations."

Rio Tinto holds a 53% stake in Bougainville Copper. The company is run out of Port Moresby by Rio Tinto Minerals staff and also funds the day-today operations of the company.