Friday September 26 5:17 AM EDT
Flooded gold/copper markets ignore El Nino in PNG
By James Regan
PERTH, Sept 26 (Reuter) - International markets awash in copper and gold have taken little notice of the drought that has brought two of Papua New Guinea's
biggest mines, the Porgera and Ok Tedi deposits in the remote Highlands region, to a standstill.
Gold and copper prices are in the cellar, with little prospect of climbing out anytime soon.
Said a metals dealer in neighbouring Australia: ``Simply put, the world doesn't need the metal.''
In the case of Porgera, a lode capable of yielding up to one million ounces of gold a year to its PNG, Australian and Canadian partners, a lack of rainfall since early
August has left hydro-powered milling operations paralysed.
Operator and 50 percent partner Placer Dome Inc (PDG.TO) said there is little to do at the mine site other than stockpile ore and wait for rain.
The South Pacific nation is in the grips of the quirky El Nino weather pattern capable of dumping unprecedented rainfall on some parts of the world and parching
others with severe drought.
But meteorologists are unable to say when the PNG weather will break.
The Highlands are just now entering their seasonal dry period, so even a lifting of the El Nino will not ensure rain.
Porgera is costing Placer and the other partners, Australia's Goldfields Ltd (GLD.AX) and Papua New Guinea government-controlled Orogen Minerals Ltd
(OML.AX), each with 25 percent, about 10,000 ounces in deferred revenue.
``We've had some rain, but not enough to justify restarting gold processing, Placer corporate affairs manager Ian Williams said.
Placer's Misima gold mine 600kms east of the mainland, while experiencing dry weather, has not fallen prey to El Nino-like conditions.
``It's dry there, but it is not being affected like the Highlands,'' Williams said.
Similarly, the Lihir gold mine, under development inside a dead volcano on Lihir Island in New Ireland Province has not been affected by the drought, a
spokeswoman said.
``We're hundreds of kilometeres away and besides, it located on an island,'' the spokeswoman said.
Lihir is expected to reach full production by the end of this month, yielding 175,000 ounces in 1997 compared with 550,000 ounces in 1998.
With some 2,000 tonnes of gold added to global supply and up to 20 times that amount estimated to be held in the vaults of central banks worldwide, Porgera's lost
output has gone unnoticed, bullion dealers said.
Normally, the more supply-driven copper market would be different. But with supply already outpacing demand and predictions of a period of depressed prices on
the horizon, Ok Tedi's woes and those of 52.6 percent owner and operator, The
Broken Hill Pty Co Ltd (BHP.AX), are not shared in the market.
BHP's corporate affairs adviser in Port Moresby, Vincent Bull, said activity at the mine, located about 200 kms west of Porgera, has been at a standstill ever since
the Fly River dried up in August. This marooned the copper concentrate-laded barges headed for the Gulf of Papua and eventually smelters in Asia and Euroope.
Bull said the region around the main mining town of Tabubil has seen only rain spits in recent days, making it impossible to predict when the Ok Tedi might resume
operating.
``Normally, Tabubil sees about 10 metres a year, it rains 330 days a year,'' Bull said.
Ok Tedi on average produces about 600,000 tonnes of concentrate annually and BHP has said the impact of the drought on the company's bottom line has been
substantial.
However, the mine's customers, including Finland's Outokumpu Oy (OUTO.H) and LG Metals Corp of South Korea and a consortium of Japanese smelters
remain unfazed by the cut to supply and a declaration of force majeure, absolving Ok Tedi of its legal obligation to make good on its deliveries. |
