PNG looks to hit a mining jackpot

PORT MORESBY - Having watched as neighbouring Australia prospers on the back of its outback mineral wealth, impoverished Papua New Guinea is trying to open its doors wider to foreign mining companies.

PNG missed the start of the latest world commodities boom - in part because of political in-fighting and corruption - but Prime Minister Michael Somare hopes tax and other reforms to the mining sector and robust demand for minerals will lead to billions of dollars in much-needed foreign cash.

Four new mines are under development and exploration teams are combing 70 sites across the country. Mining Minister Sam Akoitai said exploration licences would soon be extended to five years from two.

In the past year, 12 exploration licences have been issued, taking to 48 the number approved since Somare came to power in 2002, when only five licences existed.

"PNG has the resources to prosper from mining and things are changing there for the better, but the lead times on these projects can be far in the future," said Eagle Mining Research of Australia analyst Keith Goode.

PNG joins a growing number of developing countries, many in Southeast Asia, vying for foreign mining dollars from the likes of Anglo American, BHP Billiton and Teck Cominco.

About 85 per cent of PNG's 5.3 million people rely on subsistence farming and the country's workforce is also threatened by an alarming rise in HIV/Aids infections.

Tribal allegiances dominate, often leading to bloody feuds, and personal safety for expatriates remains an issue.

Still, miners from South Africa, Canada and Australia can be seen in 4WD vehicles scouring the country's jungle highlands and remote islands in search of gold, copper and nickel as metals prices soar in markets in New York, London and Shanghai.

The country's last big gold find was at Lihir 25 years ago and two of its largest mines, Porgera and Ok Tedi, will run out in 2009 and 2012 respectively.

However, the Kainantu gold mine, owned by Australia's Highlands Pacific, is expected to start up next month, and the Hidden Valley lode owned by South Africa's Harmony Gold Mining has just begun construction and should eventually mine 300,000 ounces a year.

- REUTERS