High fuel prices to affect mines

Mining operations in the country will be affected by the fuel price hikes as a result of the increase in global crude oil prices, according to the Mineral Resources Authority (MRA). Managing director Jerry Garry said operating mines relied heavily on diesel for machineries and heavy fuel oil for power generation. Garry said the cost of running mines increased with the hike in fuel prices. The National’s business reporter DALE LUMA conducted a Q&A with MRA managing director JERRY GARRY on the impacts of the hike in fuel prices on mining companies as well as general updates on the mining industry in the country.

Q: Global crude oil prices have increased dramatically, resulting in the increase in domestic retail fuel prices. Will that have any impact on miners and mining operations in the country?

Jerry Garry

Garry: They (mines) are not immune. Every business across the globe suffer from the same global hike in the prices.
All our operating mines rely heavily on diesel fuel and heavy fuel oil.
Mines that do not get power from the main grid use heavy fuel oil for power generation. A lot of the machineries, especially the trucks and front end loaders and mining equipment, do consume a lot of diesel fuel and lubricants.
So if there’s a hike in global fuel prices, it does also affect the mining operation, the cost of running the mine also increases.
Even gold price is high, the price of getting an ounce of gold is equally high. So yes it will affect the mining operations in the country, particularly the construction of new mines where the capital cost will really go up.

Q: Any specific updates for Porgera, Wafi and other mining operations?

The Milum Mining & Energy Services Ltd convey truck returning from Ok Tedi Mine site in Western.

GARRY: Woodlark – For Woodlark, they have elected not to proceed because of the high cost of constructing that mine.
We are yet to be informed officially by the management and the board but it is highly likely that they will not be able to get the mine developed under the value circumstances.
The previous figures show that the cost has gone up around 30 per cent.
Porgera – There will be a meeting this month in Wabag between the State and stakeholders such as Mineral Resources Enga (MRE), Enga provincial government, SML (Special Mining Lease) agents and the mining easement representatives.
It will be on the 20th and on the 21st the Prime Minister will go to Porgera Valley to address the landowners in Paiam.
The main intent of this meeting is really to give a status update to all the stakeholders as to how much benefit or current negotiations have achieved for landowners, provincial government and the local level government as well as the National Government.
The whole idea is to reach some consensus because there has been some challenges with getting the shareholders agreement over the line and commencement agreement and etc.
It’s also an opportunity to gauge the view of those important stakeholders to explore some avenues as to how these challenges can be overcome so that we get the operators or the new project company to start mining operations.
The whole idea is to highlight to them, put to them that these are the benefits that will be secured under the current arrangements.
Wafi – The State Negotiation Team is in the final stages of ironing out some of the outstanding matters.
There are two fiscal instruments that are still yet to be ironed out.
Other things have been good and it’s a matter of settling on the numbers.
So we are in the final stages of negotiations.
The development forum will take place after the conclusion of the mining development contract and preferably after the General Election 2022.

Q: Any additional comments you would like to make?

The K92’s underground stope. Mines such as K92 are not immune to the rising costs of fuel, according to the Mineral Resources Authority.

GARRY: As we’ve discussed, the cost of doing business has really gone up. There will be some restructuring and readjustment to business done to ensure that costs of producing metals are made with some degree of risks within reasonable ranges so that they (miners) are not driven out of business.
But it is really a very challenging time for every business across the globe and the mining business is no exception with the hike in fuel prices and other commodities.
That’s an onslaught from the Coronavirus (Covid-19) pandemic and the war between Ukraine and Russia, started in February, has also added extra burden on global business.