KMHL chairman explains role

Business

Kumul Minerals Holdings Limited (KMHL) was launched last July as the successor to Petromin Holdings Limited. The State entity was established under the Government’s Kumul Agenda. Chairman PETER GRAHAM spoke to The National’s Business Editor SHIRLEY MAULUDU about its roles and responsibilities .

MAULUDU: Briefly tell us what Kumul Minerals Holdings Limited is.
GRAHAM: The national government consolidated its mining and petroleum assets respectively into two Kumul entities – Kumul Minerals Holdings Limited and Kumul Petroleum Holdings Limited. Other State-owned entities were moved into Kumul Consolidated Holdings Limited. Kumul Minerals Holdings Limited was implemented through the enactment of Kumul Minerals Holdings Authorisation Act 2015. KMHL replaced Petromin.
MAULUDU: What specific role(s) comes under the responsibility of KMHL?
GRAHAM: KMHL is solely responsible for holding the State’s interests in the mining sector – whether held directly or through other entities or agencies. KMHL has the right but not the obligation to exercise the State’s rights of participation in all future mining projects in PNG. Over time, KMHL will develop a portfolio of high-quality mining projects and prospects. KMHL sees a role to promote industry investment and help facilitate resolution of any issues with the Government seen as slowing project developments.
MAULUDU: Does Kumul Minerals have any specific plans or targets this year going forward?
GRAHAM: NEC has approved the 2017 Plan for KMHL. KMHL will focus on cleaning up and consolidating its asset base and preparing to participate in future mining projects such as Wafi-Golpu and Frieda River. The State’s equity in Ok Tedi Mining Limited, Bougainville Copper Limited and Highlands Pacific Limited will transfer to KMHL. Petromin’s remaining petroleum interest in KMHL will be transferred to KPHL or divested. KMHL interest in the Nautilus Solwara One project will be carefully managed to limit any financial impact of project delays. Management of cash will be a particular focus with collection of full proceeds from the sale of Tolakuma Gold Mine, collection of other receivables, and receipt of any dividends from OTML in 2017.
MAULUDU: How does KMHL plan to achieve those set targets and plans?
GRAHAM: KMHL staffing will be substantially reduced given the expected reduced level of KMHL activity near term. Needed mining services will be provided from OTML under a Services Agreement. KMHL’s source of funds near term will be any dividends paid by Ok Tedi Mining Limited and collections from proceeds of sale of some remaining assets.
MAULUDU: What are some of the Government’s assets that KMHL is in charge of?
GRAHAM: Solwara 1 project is held by KMHL. Transfer of equity in other projects including OTML, Bougainville Copper Limited and Highlands Pacific Limited to KMHL is work in progress.
MAULUDU: Are there other potential areas that KMHL is considering to make investments in apart from the assets that it currently has?
GRAHAM: KMHL is preparing to evaluate participation in new mining projects such as Wafi-Golpu, Frieda River and others.
MAULUDU: From KMHL point of view, are there some specific issues that have kept the country’s mining industry from growing?
GRAHAM: Investment in the mining industry tend to follow price trends. Copper pricing tends to be cyclical and investors look to the supply-demand balance and the long-term price needed to encourage investment in new capacity. Prices for copper and gold have come off the highs of a few years ago resulting in reduced investment in exploration (the pipeline for new projects) and hesitation in making large investments. Investments in large projects require a favourable long-term pricing outlook and a project cost that will provide a reasonable return. One significant challenge in PNG is the lack of supporting infrastructure for major projects – power, roads, ports etc. The national government recognises the issue and is addressing it in part through a number of policies and strategies. Mining projects are often in remote locations and the front-end cost impost of providing these facilities represents a significant burden on project economics.
MAULUDU: What is KMHL’s outlook for the country’s mining sector this year going forward?
GRAHAM: PNG is blessed with some of the world’s most attractive mineral resources and PNG has demonstrated the capacity to support delivery of major projects. 2017 has started with some firming of copper prices which if sustained by fundamentals will improve industry optimism. The Government proposed changes to the Mining Act have created uncertainty and concern about the impact on project viability. Some of the draft changes proposed if implemented will seriously impact PNG’s competitiveness with other mining investment destinations and will have an adverse impact on the ability to finance projects. The Prime Minister has indicated that industry consultation will continue and that no changes will be made until after the 2017 election. Both Wafi-Golpu and Frieda River projects have made applications for SML’s under the existing Mining Act. KMHL stands ready to help facilitate resolution of outstanding issues that would enable a timely investment decision and will evaluate participation.