Papua New Guinea hopes to reopen Bougainville copper mine by 2012

Two decades after secessionist violence closed it, the country hopes to reopen the mine and to play a bigger role in global copper market, its prime minister said.

Papua New Guinea hopes to reopen its huge Bougainville copper mine by 2012, two decades after secessionist violence forced it to close, and to play a bigger role in world copper markets, the nation’s prime minister said on Monday.

“We could see the reopening of Bougainville at a cost of about $4 billion,” Prime Minister Michael Somare told a Papua New Guinea investment conference in Sydney.

Papua New Guinea regularly talks up the prospect of the Bougainville mine reopening, but industry analysts now take this possibility more seriously, given rising investor confidence in the country and surging demand for the metal from Asia.

Bougainville’s secessionist movement has also faded away.

“PNG is in the throes of becoming a major world supplier of copper,” Somare told the conference, which serves as a regular investment roadshow for the country with Australian financiers.

In 1990, miner RTZ (now Rio Tinto ) closed the mine, one of the world’s richest copper deposits, after angry villagers attacked workers and sabotaged mine operations.

World copper demand, especially from China, now represents an unprecedented opportunity for Bougainville, said Greg Anderson, head of Papua New Guinea’s Chamber of Mines and Petroleum.

“There is a real appetite to get Bougainville up and running again as soon as possible,” he told Reuters.

Copper on the London Metal Exchange fetches about $8,700 a tonne and gold $1,400 an ounce compared with $3,000 for copper and $450 for gold when the mine was abandoned.

The dormant, open-cut mine is owned by Bougainville Copper Ltd , which has retained its Australian stock-market listing. It in turn is owned 53.58 percent by Rio Tinto.

The stock firmed 0.6 percent to A$1.71 in afternoon trade, in a flat overall market.

The Bougainville rebellion was the longest-running conflict in the South Pacific, lasting 12 years from 1989 and leaving a death toll ranging from an official few hundred to a rebel tally of an estimated 15,000.

The rebellion fizzled out after a peace treaty was signed in 2001. Several of the key secessionist leaders have also died.

Rio Tinto has said that waste-disposal arrangements and funding would need to be addressed before restarting operations.

The mine has potential to annually produce 200,000 tonnes of copper and 400,000 ounces of gold, making it larger than BHP Billiton’s Olympic Dam mine in Australia, the world’s fourth-largest known copper deposit.

Sources familiar with the project said Rio Tinto had applied to the Papua New Guinea government for a fresh 21-year lease over the mine, known as Panguna.

But a Rio Tinto spokeswoman said Bougainville Copper did not have a timetable for reactivating the mine.

“There is a formal peace process underway and we are participating in that,” she said.

Under the peace treaty, with granted autonomy to Bougainville island, the local government was expected to hold an independence referendum within 15 years, but there have been no more moves towards such a vote in recent years.

Papua New Guinea is rich in resources but has often struggled to exploit them due to endemic corruption, land ownership issues and poor infrastructure.

But investor confidence has been growing, culminating in oil giant ExxonMobil’s recent decision to develop a $15 billion liquefied natural gas project in the country.

London-listed miner Xstrata Plc is also set to conclude a study in 2012 over development of its Frieda copper mine. The mine could yield 260,000 tonnes of copper and 390,000 ounces of gold a year in its first seven years.

(Additional reporting by Bruce Hextall; Editing by Mark Bendeich)

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