Out of the woods

PAPUA New Guinea’s biggest forestry player has finally decided to join the country’s mineral exploration game. PNG Report talks to its joint venture partner.
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Published in the August-September 2012 PNG Report magazine

The giant, family-controlled Malaysian Rimbunan Hijau Group empire extends into the far reaches of Russia, Equatorial Guinea and New Zealand but in PNG it dominates the local timber industry, operates oil palm projects and owns a considerable commercial property portfolio along with The National newspaper.

RH has ventured into a variety of business areas outside of timber over past decades, but it never dabbled in PNG's booming mining and exploration scenes until it struck a joint venture with Siburan Resources earlier this year.

To clinch the deal, Siburan managing director Noel Ong made the journey to RH's remote headquarters in the tiny town of Sibu on the Malaysian-controlled part of Borneo. This is where he sold the business case to RH founder and chairman Tiong Hiew King and his son,David Tiong Chiong Ong, who is also now a director of Siburan.

"I believe they do see the benefits of the resource industry and knew where we were coming from," Ong said.

After several discussions with David Tiong, it was agreed to conclude the final JV arrangements which provided RH a 70% stake in all of Simburan's PNG projects.

"We're a small company," Ong said. "If we get 30% of Porgera I think everyone will be happy." And while there is a lot more work ahead to possibly prove up a Porgera-scale project, Siburan is already benefiting from RH's business expertise in PNG.

Ong said the biggest benefit of the JV so far was RH's local presence and logistics knowledge - an important consideration in PNG where internal travel and the rough terrain are highly challenging.

Located directly southeast of Misima Island, which once hosted a gold mine, Siburan's remote Rossel Island gold project is at the far east of the Louisiade Archipelago in PNG's Milne Bay province.

Apart from what has been found by a small contingent of artisanal miners, it is largely unexplored. The island has no airstrip - a good reason why its prospects are undrilled.

The tenement is still in the exploration licence application phase but it could become a priority PNG project for the Siburan-RH JV once the government approvals are in.

Ong said three-figure grams per tonne gold results were found in streams on the island.

As for granted exploration licences, the JV's Rigo project, 70km southeast of Port Moresby, covers 1355 square kilometres of ground once held by BHP. It is also yet to be drilled.

Considered prospective for copper-gold, this grassroots project has road access, while the JV's Garaina platinum group elements project covering 697sq.km in Eastern Morobe province is only accessible by air.

By the time of publication, ground reconnaissance surveying for these projects should be either underway or complete.

Ong expects more significant inroads into exploration of both projects will occur over the next six months.

Significant stakeholders

Siburan's biggest shareholder is Chinese government-owned mining giant Hunan Nuclear Industry Geological Bureau, which acquired a 19.83% stake in Siburan for $3.09 million in July.

A more unusual kind of shareholder happens to be a member of Malaysia's royal family, Tunku Naquiyuddin, who owns a 5.13% stake of Siburan.

Ong said either Hunan or RH could possibly fully fund major exploration at any of Siburan's PNG projects.

Hunan is keenly interested in Siburan's flagship Kirwin tungsten project in New Zealand, but Ong said it also liked PNG. "They understand it is big elephant country," he said.

"What I believe about PNG is if someone comes in with big pockets you will find another Porgera. And these guys like the big size projects."

Its success in attracting the likes of Hunan and RH is quite startling considering Siburan only first signalled a possible foray into PNG projects in mid-2011.

But right from the start, Ong was convinced large-scale projects were the best strategy to overcome the various costs and complexities of operating in PNG.

"The upside of PNG is you can find the 10 to 20 million gold ounce project because it's there," he said.

Ong's ties with figures in the Chinese business world form yet another advantage in what appears to be an East Asian-dominated century in the making.

It's no secret that China's ever-growing economy has helped stave off an even worse global economic malaise since 2008. But with the threat of inconceivably high sovereign debt hanging over much of Europe, not to mention the debt-plagued US, just the mere hint of small percentile drops in any set of Chinese economic figures has spooked markets this year.

Ong thinks most Australian Securities Exchange-listed explorers have pulled back spending of late.

"The best thing we have ever done is raise money," he said.

"We have got about $4 million in the bank and it's next to impossible to raise money in the current climate."

This cash position compares more than favourably with Siburan's market capitalisation at the time of publication of around $5 million.

Back to the circulating fears of a China slowdown, Ong believes more Chinese stimulus measures are ahead after the leadership changes in the country are finalised by late 2012.

While time will tell if there is another Chinese rescue for global markets ahead, the strength of Siburan's JV partners suggests a series of project milestones in PNG can be expected next year.

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