World’s gold hunt may end at closed mines!

February 13, 2009

Commodity Online
NEW DELHI: At a time when gold prices are soaring to new heights and demand fro the yellow metal rising due to safe haven buying, miners across the world are looking for new avenues to dig out the precious metal.

Abandoned mines in Kolar and in troubled Papua New Guinea are the focus of several gold hunting explorers now.

Experts are looking for certain mines which were abandoned during the troubled times and they are thinking of reviving it because they contain huge quantities of gold and copper.

One such mine is in Bougainville Island, which still has plenty of copper and gold. It was abandoned by Rio Tinto Ltd two decades ago following an attack by secessionist rebels.

Another case is the gold mines in Kolar, India. The Indian government plans to revive the century-old Bharat Gold Mines (BGML). The company was wound up in 2001 when gold prices fell below the cost of extracting the metal, and mining operations at its Kolar gold fields (KGF) were outsourced.

Based on geological data from 1989, over one billion tonnes of ore could still be mined from Bougainville Island, which is more than the 675 million tonnes dug over 18 years the mine operated.

Bougainville Copper Ltd, the 53.58 per cent-owned Rio Tinto subsidiary, said it is a sufficient potential for a viable operation resuming at the mine.

There has been no exploration or mining at Panguna because the site remains off-limits despite the formation of an autonomous island government.

In 1988, the mine produced 166,000 tonnes of copper and 445,000 ounces of gold, worth $1 billion at today’s prices for both metals.

Rio Tinto has long-shunned returning to Bougainville island despite an end to hostilities in 2001 and discussions from time to time with the government.

In 2005, it sold its stake in another mine on Papua New Guinea’s Lihir island and holds no other interests in the country.

Rio Tinto is seeking to sell billions of dollars in non-core assets such as uranium, iron ore and potash mines worldwide to pay off debts caused by the bust in commodities markets, though it hasn’t mentioned its stake in Panguna as being on the block.

In the Kolar mine’s case, a draft offer document has been prepared, inviting global bids for starting mining operations. The selected bidder is expected to bring in requisite technology and necessary funds to restart operations.

In 2001, Bharat Gold Mine was liquidated as the cost of producing the metal at Rs 14,000 per 10 gm was more than three times the price of gold, then ruling at Rs 4,000 per 10 gm. In seven years, things have changed dramatically for gold.

In early 2008, global production costs rose to $400-500 an ounce, while prices were in the vicinity of $1,000.

The winning bidder will have to bring in cutting edge technology for deep underground mining. At 3,200 metre, Kolar’s Champion Reef mine was the second deepest in the world. And, because of its depth, an underground lab in KGF also hosted the first successful cosmic ray neutrino interaction way back in 1965.

A potential mining partner also needs to be adept at extracting gold from the dumps of mine tailings, some of which are over 100 years old. The bidder also needs to have experience of smelting technology.

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