SYDNEY, Dec 8 (Reuters) - After nearly 50 years on the drawing board, the latest backers of Papua New Guinea’s $3.6 billion Frieda River copper project say the time may finally be right for the giant mine - even if some hurdles remain.
Regarded as one of world’s largest untapped copper-gold resources, the deposit has sat dormant as successive owners, including some of the world’s biggest mining houses, proved unwilling or unable to spend the billions of dollars needed to construct a mine in remote jungle far from the country’s coast.
Current owner PanAust Ltd, a former listed Australian miner now a unit of China’s Guangdong Rising Assets Management (GRAM) , has submitted an application for a special mining licence to the PNG government for an initial $3.6 billion project.
PanAust managing Director Fred Hess points to the success of ExxonMobil’s $19 billion liquefied natural gas plant, which has been running for two years in a country known for its difficult terrain, lack of infrastructure and sometimes fractious landowners.
“It gives the backers of Frieda River the confidence that we can get all of this together and finally make it a reality,” Hess told Reuters at a mining conference on investment in the Pacific country.
Bankers, too, are pencilling in Frieda River as one of a number of projects likely to be needing financing.
“The first stage of Frieda River is $3.6 billion. The second phase is another $2.3 billion on top of it,” said Wai Mun Lum, ANZ’s head of mining and resources infrastructure, project and export finance.
“We do really feel quite excited about opportunities in PNG that will be coming up in the project financing space.”
Analysts say factors in the project’s favour include a forecast world shortage of copper in coming years, China’s desire to secure supplies and the sheer scale of the project.
“Now more than any time before, Frieda River could see the light of day,” said Gavin Wendt, analyst for MineLife in Sydney, who ranks the deposit among the next generation of mega-projects.
Papua New Guinea once supplied millions of tonnes of copper ore to smelters in Asia and Europe in the 1980s and 1990s.
Rio Tinto was run off the restive Bougainville Island in 1990 by residents who wanted to reintroduce an agrarian society.
A decade later BHP Billiton relinquished ownership in the Ok Tedi mine to a government trust following claims by landowners over toxic mine waste in local waterways.
PNG Prime Minister Peter O‘Neill, facing an election in mid-2017, has made foreign investment in new resource projects a priority for his administration as he seeks to boost growth .
“Frieda River is a very important project for my country,” O‘Neill told Reuters at the conference.
But hardheaded financing decisions are still to be made.
PanAust says it is unlikely to be issued a special mining licence needed to proceed to the initial phase of development, before next year’s election.
“Our timing hasn’t been all that good,” said Hess. “Once the election is over and there is a mandate from the government, things will begin to move smoothly,” he said, but added the caveat that there was “quite a way to go” before an investment decision was made.
Bankers also cautioned that proposed changes to mining laws are creating uncertainty, while the project will need deep pockets to build port and power facilities and an air strip, with the likely backers unlikely to have the funding capacity of an ExxonMobil.
Even with a quick go-ahead, Highlands Pacific, which has a 20 percent stake in the project, says the current timeline would include two years for approvals and six years for construction, meaning first production no earlier than 2024/25.
Reporting by James Regan; Additional reporting by Sonali Paul; Editing by Richard Pullin