June 2018

Papua New Guinea

  • By Cameron Scott

Resource-rich Papua New Guinea has excellent potential for future mining projects, but a lack of infrastructure, inhospitable terrain and economic instability continue to provide challenges to investment in the region

Papua New Guinea (PNG) comprises the eastern half of the island of New Guinea, just north of Australia, and has been an independent nation since 1975. It is rich with mineral deposits including copper, gold, silver, nickel and cobalt, as well as petroleum and natural gas. Despite relatively recent exposure to the mining industry, mineral resources have become the cornerstone of the PNG economy, accounting for around two-thirds of exports. As a result, PNG’s economy is inextricably linked to the volatile global commodities market. While the country benefited from a wave of growth in commodity prices between 2003-11, prices have since declined and public spending has been adjusted downwards. Resource exports make up most of PNG’s small formal sector, while 85 per cent of the population is employed in the informal sector, mostly in subsistence agriculture.

PNG’s mining sector is overwhelmingly owned by foreign companies, although the government holds equity in most projects. The government’s Mineral Resources Authority regulates mining activities, grants exploration and mining licenses, and carries out geological studies to promote further mineral exploration in the region. The government generates revenue from mining operations through taxes and royalties, which require mining lease holders to pay the equivalent of two per cent of net proceeds to the state.

Significant current and proposed mining operations

Gold and copper are PNG’s most significant mineral commodities. In 2014, gold exports totalled 58 000 kg at a value of US$2.14 billion. Copper exports totalled 89 600 metric tons at a value of about US$591 million.

Ok Tedi Mining Ltd is a state-owned company that operates an open cut gold, copper and silver mine located in the Star Mountains in PNG’s Western Province. Since operations began in 1984, the mine has produced 14.3 million ounces of gold, 30.2 million ounces of silver and 4.65 million tonnes of copper.

The Lihir gold mine in the New Ireland Province is one of the world’s largest known gold deposits, estimated to have a resource total of 150 million ounces of gold. It is 100 per cent owned by Newcrest Mining Ltd of Australia.

2016 saw a returning interest in exploration licences after a significant decline in previous years. A joint venture between Newcrest and Harmony Gold Mining Company Ltd is continuing feasibility studies for the Wafi-Golpu copper-gold mining project, with mineral resource estimates of 26 million ounces of gold and 8.8 million tonnes of copper. Another joint venture between PanAust Ltd and Highlands Pacific has conducted feasibility studies for the Frieda River project. Mineral resource estimates at the Frieda River site show 13 million tonnes of copper and 622 070 kg of gold, positioning it as the largest undeveloped copper-gold project in PNG and one of the world’s top ten undeveloped open pit copper mines.

Liquefied Natural Gas

2014 saw the completion of the US$19 billion PNG liquefied natural gas (LNG) project, an integrated gas production and processing facility, operated by ExxonMobil PNG and co-ventured with five partners. The construction and initial operations of the plant helped to mitigate the effects of declining mineral commodity prices from 2012. In 2014, the project’s planned annual output was 6.6 million tons of gas and condensate per year, but output as of 2017 has exceeded eight million tons per year. The country’s natural gas reserves are estimated to be 155 billion cubic metres.

The production of LNG doubled the resource GDP in just a few months, and output in the oil and gas sector is now greater than the combined output of gold, copper, nickel, wood and palm oil from the mineral and agricultural sectors. The value of LNG exports increased by around US$3 million from 2016 to 2017, due to increased demand from Japan, China and Taiwan. Additionally, 2017 saw the PNG LNG price rise above the regional benchmark for the first time. There are further plans to develop newly discovered gas fields in the country, with PNG forecast to be a world competitor in LNG production.

Challenges ahead

PNG is rich in natural resources, but its mountainous terrain means exploitation of those resources can be slow and difficult. Many current and prospective operations are in remote areas with poor infrastructure and limited access. The success of future development in the region will depend on logistical improvements in these areas.

PNG’s climate has also proven to be a challenge for the industry. In 2015, a severe El Nino weather pattern caused widespread drought across the country, which affected water availability for mineral processing. Additionally, the Fly River dried up, leaving the Ok Tedi mine without an important transport link, which resulted in the mine’s closure from August 2015 to March 2016.

The global downturn in mineral prices has seen the need for companies to improve productivity, reduce operating costs and improve safety standards. In April 2016, a failure in a high-pressure steam pipeline at the Ramu nickel mine resulted in the death of one worker and seriously injured two others. The mine was closed temporarily while the incident was investigated and reopened in July. Incidents like these remind companies and government that a stable mining industry relies on improving measures to guarantee the safety of employees.


Central Intelligence Agency, 2018. The World Factbook: Papua New Guinea [online]. https://www.cia.gov/library/publications/the-world-factbook/geos/pp.html

Mineral Resources Authority, 2016. Mining and Exploration Bulletin [online]. Available from: http://www.mra.gov.pg/Portals/2/Publications/Mining%20&%20Exploration%20Bulletin%202016.pdf

Papua New Guinea Department of Mining, 2005. The Geology and Mineral Potential of Papua New Guinea. [online] Available from: http://www.infomine.com/library/publications/docs/PapuaNewGuinea2005.pdf

US Geological Survey, 2017. 2014 Minerals Yearbook: Papua New Guinea. [online]. Available from: https://minerals.usgs.gov/minerals/pubs/country/2014/myb3-2014-pp.pdf

World Bank Group, 2017. Papua New Guinea Economic Update December 2017 [online]. Available from: http://pubdocs.worldbank.org/en/150591512370709162/PNG-Economic-Update-Dec-2017.pdf

Exxon Mobil, 2018. PNGLNG: Project Overview [online]. Available from: https://pnglng.com/About/Project-overview

Image: Byelikova Oksana/Shutterstock.com.

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