Newcrest Mining has lined up the $US4.8 billion Wafi-Golpu copper-gold project in Papua New Guinea as the next big growth opportunity to follow the completion later this year of its $US3.2bn expansion of its Lihir goldmine in PNG and its Cadia East gold-copper project development in NSW.
The Melbourne-based Newcrest and its South African partner, Harmony, yesterday confirmed Wafi-Golpu in PNG's Morobe province as a world-class copper-gold project, with a pre-feasibility study into a development of the larger Golpu showing it would be capable of producing copper at a cash cost of US54c a pound compared with the current price for the red metal of $US3.42 a pound.
Alternatively, applying copper revenue as a credit for gold production yields would result in an expected negative cash cost of -$US2150 an ounce at the base case production scenario, and a negative -$US1900 an ounce at an enhanced production scenario.
Developing Golpu comes with a world-class development bill. The $US4.8bn expected cost covers a mine capable of producing 400,000 ounces of gold and 250,000 tonnes of copper annually (base case), with first production possible by 2019 from the underground operation mine, 65km west of Lae.
The development cost is nevertheless below market expectations for a $US5bn bill and confirms that, on a copper equivalent basis, Wafi-Golpu will be one of the lowest cost copper developments in the world on a pound for pound basis. Its copper and gold grades are matched only by the Grasberg mine in Indonesia and Rio Tinto's Oyu Tolgoi mine in Mongolia.
Wafi-Golpu is owned 50:50 by Newcrest and Harmony. The PNG government can take up to a 30 per cent interest in the project at a price equal to the sunk cost and has signalled it will do so. Newcrest also indicated a willingness to buy Harmony out of the project but Wafi-Golpu is central to that group's strategic plan. Newcrest's 35 per cent end share would cost it $US1.68bn to fund.
The release of the study came with a new ore reserve estimate for the Golpu deposit. It now stands at 12.4 million ounces of gold and 5.4 million tonnes of copper. That is a rise of 11 million ounces of gold and 4.7 million tonnes of copper.
The Wafi-Golpu project area is hosted in a geological feature known as the Wafi Transfer Zone that can be traced for 25km. Two porphyry copper-gold deposits (Golpu and Nambonga) and the high-grade Wafi gold-silver epithermal deposit have been found to date, and more targets along the zone remain to be fully tested.
The total mineral resources outlined at Golpu, Wafi and Nambonga stands at 28.5 million ounces of gold, 9.06 million tonnes of copper and 50.6 million ounces of silver.
Despite its world-class status, Wafi-Golpu poses challenges. Infrastructure is nonexistent and the metallurgy is difficult, with the pre-feasibility study pointing to only 61 per cent recoveries for gold (93 per cent for copper). At today's prices, about 75 per cent of mine revenue would come from copper.
The pre-feasibility study estimated an initial mine life of 26 years with annual production of up to 580,000 ounces of gold and 300,000 tonnes of copper. Cash costs of production were said to be in the "first quartile" when applying the gold or the copper as by-product revenue.