Canada-headquartered Kainantu Resources has unpacked the rationale behind its acquisition of Harmony Gold Mining’s Kili Tele gold/copper project, in Papua New Guinea.
The company will acquire the project from Harmony’s subsidiary, Harmony Gold Exploration, for $1-million.
The acquisition aligns with Kainantu’s strategy of building shareholder returns through value-accretive acquisitions. The company says the “transformative” asset will elevate the portfolio as an established gold/copper resource that has the potential for significant growth.
The project lies in the highly prospective Papuan Fold Belt, which hosts world-class projects such as Frieda River and Porgera.
Harmony had already made extensive progress in developing the project, delineating a resource of 800 000 t of copper and 1.8-million ounces of gold.
Kainantu intends to work towards a preliminary economic assessment, and thereafter a feasibility study. Should these steps progress, Kianantu will make further payments to Harmony of $3-million and $4-million, respectively, as well as pay a 1.5% net smelter royalty from future mine revenue.
The company is keen to test the viability of an openpit operation at Kili Tele, and will consider ways in which to optimise the project with a focus on higher grades and lower throughputs.
Kainantu notes that there is local infrastructure in place to support a new mine at Kili Teke. The company mentions that the Hides gas power station, which supplies power to the nearby Porgera gold mine, is 50 km south of Kili Teke, while a large sealed airstrip lies 80 km south of the project.
The company expects the Papua New Guinea government to make good on its commitment to build sealed roads between the local towns of Komo, Tari, Korobo and Mendi, all of which would serve a future mine at Kili Teke.
It also helps that stakeholders within Kianantu have significant experience operating in the Hela district where the project is located.
The company is also confident that it can develop a viable community programme at Kili Teke.
“We appear to be facing a multidecade secular change that will drive a structural shift in commodity demand and the relationship between our sector and its customers. We see the year ahead to be an exciting one for Kianantu and we look forward to updating the market accordingly with both next steps for the Kili Teke project and further potential acquisitions we have in the pipeline,” comments CEO Matthew Salthouse.
He adds that Kainantu’s portfolio is made up of two key commodities that are typically used to diversify risk, which bodes well in times of economic downturn, as commodities tend to go up and act as a hedge against inflation.
“The macroeconomic environment has been volatile in the last few years to say the least, with Covid-19, in particular, having caused huge inflationary pressures.
“With commodities’ traditional inflation hedging properties, we anticipate the commodities in our portfolio to be as good as any asset class to be invested in, as we navigate the prevailing economic climate,” he adds.