Highlands Pacific: Mining

The Company

Highlands Pacific is a PNG incorporated and registered mining and exploration company listed on the Australian Securities Exchange and on the Port Moresby Stock Exchange. Highlands’ major assets are interests in the producing $2.1bn Ramu nickel cobalt mine and the Frieda River copper-gold project, with exploration in progress in the Star Mountains. Highlands also has an exploration tenement on Normanby Island (Sewa Bay).

Highlands has achieved a major turnaround in earnings, reporting a profit of $7.6m for 2014, compared with a prior year loss of $37.2m in 2013. The profit included a $15m impairment reversal for the company’s investment in the Ramu nickel mine.

The value of the company’s interest in Ramu has been increased from $35m to $50m due to improving production rates. Cash at bank at December 31, 2014 was $7.1m, and this does not include the $5m received by the group on February 11, 2015 as the result of the completion of the Star Mountains joint venture (JV) and farm-in agreements with Anglo American. Highlands’ 8.56% interest in the Ramu mine will increase to 11.3% at no cost to the company after repayment of its share of the project debt. The mining firm also has an option to acquire an additional 9.25% interest in the Ramu mine at fair market value, which could increase the company’s interest in the mine to 20.55% if the option is exercised.

Highlands has been working towards the development of the Frieda River project for more than 20 years and the introduction of a new partner, PanAust, in August 2014 brings renewed commitment and focus to the project, as well as a revised development concept that is more manageable in scope, with a reduced capital requirement.

The Frieda River copper and gold project is currently one of the largest undeveloped copper gold projects in the world, with resources estimated to total in excess of 2bn tonnes of ore, containing more than 13m tonnes of copper and 20m oz of gold.

PanAust brings extensive technical experience, having successfully developed the Phu Kham copper-gold project in Laos, and Frieda River, as PanAust’s biggest development project, will be the main focus for management attention and resources.

The Frieda River transaction was completed in August of 2014, and PanAust then exercised its option to take an additional 64m shares in Highlands on the same terms as the earlier placement, lifting its shareholding to approximately 14% and making it the largest shareholder in the company.

PanAust will also be responsible for 100% of the costs incurred by the Frieda River JV to finalise the definitive feasibility study for PanAust’s development concept and will appoint and fund the cost of an independent expert to provide a peer review.

PanAust will also be responsible for the costs to maintain the Frieda River project site, assets and community relations programmes up to the point in time of lodgement of the mining lease or special mining lease application.

Highlands’ Star Mountains exploration tenements are located approximately 20 km north of the Ok Tedi mine, in the West Sepik Province. They lie within the highly prospective New Guinean Orogenic Belt, which hosts the Grasberg, Ok Tedi, Porgera and Hidden Valley mines, as well as the Frieda deposit. Highlands has formed a JV with partner Anglo American for the Star Mountain deposit, which substantiates the world-class potential and will enable an extensive exploration programme to be undertaken. The team believes that Star Mountains has the potential to be a major copper-gold project.

In addition, Highlands also has the Sewa Bay project in Milne Bay Province. Japanese trading house Sojitz Group has recently commenced working with Highlands towards a JV and farm-in agreement for the development. Exploration drilling will soon begin at Sewa Bay, with the prospect of developing a modest direct-shipping export nickel-mining operation.