PAPUA NEW GUINEA - NGG secures lease extension

Several licences covering New Guinea Gold’s operations in Papua New Guinea have been renewed and extended by the country’s Mining Minister. After a recommendation from the Mining Advisory Council, Byron Chan has formally renewed the company’s expiring mining leases, mining easement and its exploration licence.

The company’s mining lease at the Sinivit Gold Project in New Britain Province has been extended for a further 10 years, to expire in 2022. Its mining easement 70 has been renewed for 8 years, expiring in 2020 and the current exploration licence has been granted for a further two years and will expire on May 10, 2013.

Conditions of the renewals include a requirement for NGG to change its processing method within the next two years in order to make it more efficient. This is consistent with the company’s current strategy and plans are under way to accommodate such a change should the definitive feasibility study produce a positive economic outcome. New Guinea Gold must also begin negotiations with the State to assess its participation in the mining lease.

The company’s chairman Ces Iewago says, “This is a great outcome for New Guinea Gold and reflects well on the relationship that has been fostered with the PNG authorities. The company now has certainty of tenure and a great basis for moving ahead. We look forward to working closely with all of our stakeholders to maximize the value and benefits deliverable from the Sinivit Mine and the surrounding high-potential exploration acreage.

“The possible addition of the State as a stakeholder in the project would be welcomed and the expression of interest confirms the belief the PNG government has in the potential of the project.”

NGG is currently experiencing a critical cash flow shortage, after PNG Gold failed to meet its obligations under a provision of services agreement which was signed in a bid to boost NGG’s cash flow after a shutdown at the Sinivit copper-gold mine in December last year. Whilst the mine has resumed operating, the ramp-up of gold production has been slower than anticipated and gold production remains well below the capacity being achieved prior to the suspension of operations.

The board is currently considering the options available to raise the necessary short-term working capital requirements and address the longer term objectives of the company.

NGG is also continuing with its exploration drilling at the Kavursuki zone, which is 2km north of Sinivit. Assay results so far have confirmed intersections of 1 metres @ 3.25 grams/tonne gold and 2.1 metres @ 1.21 grams/tonne gold.

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