2015 ROD Regulatory Update

Roger Gunson, Executive ManagerRegulatory Operations Division

Mineral Resources Authority

27 November 2015

REGULATORY OPERATIONS STAFF HARD AT WORK…

CHANGING TIMES

Data Source: BPNG Economic Bulletins, 2007 - 2014

2007 2008 2009 2010 2011 2012 2013 2014 -

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

9,000.00

10,000.00

PNG MAIN EXPORTS

Mineral PGKmillCrude Oil PGKmillRefined Petroleum PGKmillForestry PGKmillAg&Marine PGKmillLNG PGKmill

YEARS

EX

PO

RT V

ALU

E (

Km

illion)

ORGANISATION CHART

MINING ACT 1992

MINERAL RESOURCES AUTHORITYACT 2005

MINING (SAFETY) ACT 1977

REGISTRAR of TENEMENTS

TECHNICAL ASSESSMENT

BRANCH

MANAGING DIRECTOR

CHIEF MINING WARDEN

MINES INSPECTORATE BRANCH

MINING ADVISORY COUNCIL

Executive Manager, Regulatory Operations Division

Minister for MiningGovernor-in-Council

MRA Board

Chief Inspector of Mines

• ‘Currently’ producing Gold, Silver, Copper, Nickel & Cobalt

• Significant alluvial gold & silver deposits

• Hosts the world’s 1st offshore deep sea mine

• PNG is located within the Pacific ‘Rim of Fire’ with significant geothermal resources which are defined as a ‘mineral’

• Further world class discoveries of gold, copper & nickel

• New mineral discoveries of molybdenum, heavy mineral sands and coal.

PNG MINERAL PROFILE

Mining Production

Levy

• 0.25% of assessable income or value of alluvial gold exports

Company (Income) Tax

Dividend Withholding

Tax• 10 %

Royalty • 2% on net smelter returns• No additional profit or capital gains taxes• No restrictions on repatriation of profits

Special Mining Lease

• May enjoy negotiated tax advantage during “investment recovery period”

Tax Credit Scheme

• Money spent on approved related projects = tax deduction

State Equity Participation

• The State has an option in all exploration licenses to take up to 30% equity in any PNG Mining development

• Equity payment based on ‘un-recouped sunk costs’

CURRENT FISCAL REGIME IN PNG

• 30 %

MRA

Mineral Tenements in PNG

Tenement Status 2014 & 2015

2014 Nov

2014 Dec

2015 Jan

2015 Feb

2015 Mar

2015 Apr

2015 May

2015 Jun

2015 Jul

2015 Aug

2015 Sep

2015 Oct

Ac-tive Tenements

328 316 320 316 297 296 308 283 290 284 293 289

New Ap-pli-cations

171 144 194 159 163 170 159 165 133 176 153 133

Ac-tive Tenement - Re-newal Ap-pli-cations

108 107 95 90 101 104 91 98 85 91 86 86

To-tal

607 567 609 565 561 570 558 546 508 551 532 508

50

150

250

350

450

550

650

Mining Tenement Status - 2014 to 2015

EXPLORATION LICENCE STATUS

2014 Nov

2014 Dec

2015 Jan

2015 Feb

2015 Mar

2015 Apr

2015 May

2015 Jun

2015 Jul

2015 Aug

2015 Sep

2015 Oct

New Ap-pli-cations

77 76 79 92 89 95 83 88 93 95 87 83

Ac-tive Tenement - Renewal Appli-cations

90 90 79 75 88 88 75 82 68 74 69 61

Ac-tive Tenements

134 120 123 121 102 103 116 100 104 98 102 107

To-tal

301 286 281 288 279 286 274 270 265 267 258 251

25

75

125

175

225

275

325

375

Exploration License Status - 2014 to 2015

MINERAL TENEMENT APPLICATIONS

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

2013 12 4 26 15 11 4 2 16 5 13 26 5 139

2014 2 11 16 13 15 10 12 12 26 8 14 43 182

2015 5 19 14 5 8 13 16 14 8 11 NaN NaN 113

2.5

7.5

12.5

17.5

22.5

27.5

32.5

37.5

42.5

47.5

52.5

57.5

Mining Tenement Applications Received Each Month From 2013 to 2015

GOLD AND SILVER PRODUCTION

2013 2014 2015

Gold 1472343.62405607 1536217.73467599 1266130.82217185

Silver 2682478.43406933 2473255.12155063 1528745.47972218

0.25

0.75

1.25

1.75

2.25

2.75

Gold and Silver Produced

zot

(mill

ion)

COPPER PRODUCTION

2013 2014 2015

Total 81723 75907 40372

5.00

15.00

25.00

35.00

45.00

55.00

65.00

75.00

85.00

Copper Produced

Tonn

es (0

00)

NICKEL AND COBALT PRODUCTION

2013 2014 2015

Nickel 0 19595 14921

Cobalt 0 1990 1446

2.50

7.50

12.50

17.50

22.50

Nickel and Cobalt Produced

Tonn

es (0

00)

MINING WARDEN HEARINGS 2014/2015

Hearing Scheduled Hearing Complete Hearing Deferred Cancelled, withdrawn, Surrendered

2015 (Jan-Oct) 300 271 26 3

2014 (Jan-Dec) 198 144 54 0

25

75

125

175

225

275

325

Mining Warden Hearing for 2014 and 2015

MINING ADVISORY COUNCIL AGENDA ITEMS

Renewal Applica-tion

New Application Other Items Total Agenda Items

No. of MAC Meet-ings Held

(includes Special Meetings)

2015 (Jan-Oct) 91 292 206 589 7

2014 (Jan-Dec) 64 131 243 438 7

25

75

125

175

225

275

325

375

Mining Advisory Council Agenda Items For 2014 And 2015

Note: As of October 2015, there were 5 MAC Meetings and 2 special MAC Meetings

Key Mining Developments in PNG

• Pan Aust completed the acquisition of 80% of the Frieda River project from Glencore/Xstrata in late 2014. They have since been 100% acquired by their majority shareholder and delisted

• K92 completed its acquisition from Barrick Kainantu of the Kainantu underground gold & copper mine in February 2015

• Anglo American completed a joint venture/farm-in with Highlands Pacific to take its Star Mountains project into advanced exploration/feasibility

• Barrick announced on 26 May 2015 a strategic partnership with Chinese mining group Zijin Mining acquiring 50% of the Porgera mine

• Niugini Nickel commenced a feasibility study into the viability of direct exports from Wowo Gap

• Mayur Iron is moving to feasibility on their Malaulaua heavy mineral sands deposits. Katana made an ML application for its Salamaua mineral sand deposits.

• Tolukuma expects financial close on its acquisition by Singapore based Asidakona on 30 November 2015

• Waterford Coal have released a comprehensive report on the coal resources of PNG. Prospects in the Gulf Province are encouraging.

2016-2020 PNG MAJOR PROJECT OUTLOOK

• Frieda River development (copper/gold) - $USD1.8 billion – production 2020

• Wafi/Golpu Stage 1 development (copper/gold) - $USD2.3 billion – production 2020

• Solwara 1 – Nautilus/PNG Government – $USD480M - production 2018 • PNG LNG – Exxon Mobil Train 3 – $USD5 billion - production 2019• Papua LNG – Total/Interoil/Oil Search - $USD20 billion – production 2020Advanced exploration tenements – major development prospects• Ok Tedi Mining Limited – Townsville prospect – copper/gold• Highlands Pacific/Anglo American – Star Mountains prospect – copper/gold• Niugini Nickel – Wowo Gap – nickel laterite• Katana – Buso– mineral sandsMines Re-opening• Kainantu – production 2017• Tolukuma – production 2017= 5 year period of intense resourcing & administrative pressure aligned with approvals, development and construction – from 2020 the sky is the limit…

MAP OF APPROVED MINES

MAP OF ADVANCED EXPLORATION

• During the past 18 months, the following new policies have been developed and submitted to government: • Geothermal Policy• Mine Closure Policy • Involuntary Resettlement Policy • Offshore Mining Policy • Sustainable Mining Policy • Mining Policy

• The legislation review includes the Mining Act 1992, Mining (Safety) Act 1977 and respective Regulations.

• The process has reached the approval and Bill phase in respect of the policies and Mining Act.

• When the Mining Bill becomes law there will be a 1 year transitional implementation period.

MINING POLICY DEVELOPMENT & REVIEW OF MINING LEGISLATION

• Alluvial or artisanal mining is a very active sector in PNG with certain regulatory ‘reservations’ for citizens

• Estimates indicate up to 100,000 actively mine within this sector

• Tenements for small scale miners may be held under an Alluvial Mining Lease (AML) or a Mining Lease (for alluvial purposes (ML))

• Commercial arrangements are secured through registered ‘Tribute Agreements’

• To further promote the sector, the Small Scale Mining Branch (SSMB), hosts an annual Alluvial Mining Convention & Trade Show in Lae

• MRA, in conjunction with the SSMB, has an aspirational goal to double alluvial production & revenue by 2020.

PNG ALLUVIAL MINING SECTOR

SSMB TRAINING SESSIONS 2014/2015

Onsite Outreach Total

2015 (Jan-Oct) 11 9 20

2014 (Jan-Dec) 7 22 29

13579

1113151719212325

SSMB Training Sessions for 2014 and 2015

No.

Of T

rain

ings

Note: Outreach figures also includes attendance at Convention and Conferences held within and out of PNG

PNG ALLUVIAL MINING DATA:PRODUCTION

2008 2009 2010 2011 2012 2013 2014 2015

Gold (koz)

85.35327 103.57847 109.207159 101.590653 96.3825292 96.662518 119.846919 97.683323

Silver (koz)

25.98556 36.7191 39.574424 35.552934 54.0828822 44.206894 48.982555 33.249938

10

30

50

70

90

110

130

150

170

Alluvial Export Quantity - Au & Ag2008-2015

Kilo

oz

PNG ALLUVIAL MINING DATA:REVENUE

2008 2009 2010 2011 2012 2013 2014 2015

Gold (PGK'M)

179.95761771738

263.284632790388

348.118581355257

356.606083329194

318.229252158154

296.04215583561

373.353947089776

307.628560531462

Silver (PGK'M)

0.899708584823571

1.4113839946073

2.05788208032619

2.82461286695382

3.36064284819062

2.2613019566649

2.31428039904449

1.39283629484921

25

75

125

175

225

275

325

375

Alluvial Export Value - Au & Ag2008-2015

PGK'

M

MOANS, GROANS & INITIATIVES• Reporting – continues to be the biggest

compliance issue

• Variations – encouraged and consequently more frequent – ensure application is well supported by submissions, documentation and meets Act requirements

• Litigation – significant increase in regulatory matters before the National Court – often an abuse of process intended to frustrate ‘competitors’ or through ignorance

• Financial Capacity – new applicants providing poor information

• The MRA Board has approved an increase in the SML application fee to K500,000

ROD INITIATIVES

• Annual Report – with better, verified data available we hope to produce a Report on mining and tenement related matters which will combine the Safety Branch information already being published

• Tenement Applicant letter – the need to advise applicants of our requirements and expectations is apparent so we will send out a letter upon receipt of an application setting out what information is necessary, referencing the Act sections

• Guarantees – wider use of this approach, especially for new applicants who lack tenement history and/or are offshore based

• Continued improvements and advancements to Flexi – addition of geological data

• Better ways of producing data from Flexi

PLAUDITS

The dedication of my team and their embracing of better ways to deliver our regulatory services to this industry

PATTY

HELEN

EM TASOL NA TENKU TRU