Joint Venture with Newmont
TPJ holds a 25% carried, interest in Morobe which is located in a major, emerging gold-copper district in west central Papua New Guinea where the venture’s managing partner, Newmont, has conducted advanced exploration on two prospects and identified numerous follow-up targets with multi-million ounce gold potential.
Morobe comprises exploration licences covering about 3700 square kilometres centred on the town of Wau in Morobe Province and adjacent to historic gold mining areas and recent major discoveries, including:
• The Morobe Goldfields in the Wau district which, since the 1920’s, have produced over 3.5 million ounces of gold from alluvial and hard rock mining operations;
• The Hidden Valley mine which commenced operations in 2010 with an annual production capacity of 250,000 ounces of gold and significant silver credits from a resource containing 5.8 million ounces of gold;
• The Wafi-Golpu project which is expected to double its reported resources to 40 million ounces of gold and 15 million tonnes of copper;
• Other gold discoveries in the 1980’s including Hamatu (1 million ounces) and Kerimenge (1.8 million ounces), both in the Wau district.
A joint venture agreement was signed with Newmont in December 2008. It granted Newmont Ventures Limited, a subsidiary of Newmont Mining Corporation, the right to earn a 51% managing interest in the JV by spending US$6 million on Phase 1 exploration, and a further 19% on the earlier of spending US$9 million on Phase 2 exploration or on delivery of a feasibility study, either to occur before 23 December 2014. TPJ may then elect to have Newmont fund its share of mine development in exchange for which Newmont earns a further 5% interest. If either party’s interest dilutes to 10%, that interest converts to a 1% NSR royalty.
Newmont met its Phase 1 and Phase 2 obligations in September 2010 and November 2011, respectively, and TPJ has exercised its option to be carried through to the commencement of commercial production. Accordingly, TPJ will retain a 25% undilutable interest in the JV which will be funded by loans from Newmont at an interest rate of LIBOR plus 4% p.a. with repayments to be made out of 90% of TPJ’s share of any future positive cash flows from commercial production(see TPJ press release, 30th December 2011).
The geology of the area is dominated by the Mesozoic Owen Stanley metasediments that are intruded by the Morobe Granodiorite of Middle Miocene age. The central part of the goldfield overlies a graben filled by Pliocene volcanics and sediments that are intruded by the Edie Porphyry and the Namie Breccia which host much of the primary gold mineralisation in the Wau district. This structural setting can be compared to other extensional basin settings such as Fruta del Norte (Ecuador) that are favourable for large epithermal systems.
Mineralisation in the Morobe region ranges from deep porphyry copper-gold, through quartz-sulphide copper-gold veins, carbonate-base metal (CBM) veins, to shallow epithermal quartz Au-Ag veins. The deposits that have been mined to date such as the Hidden Valley deposit are of CBM type, but these may overlie porphyry style Cu-Au deposits as at Wafi-Golpu.
The Morobe concession area has been explored historically by a number of companies, most notably Conzinc Rio Tinto of Australia (CRA) in 1984-1995 when it discovered the Hidden Valley deposit. CRA’s work, TPJ’s exploration in 2006-2008 which focused on accessible, high grade, epithermal vein deposits, and Newmont’s management of the JV’s Phase 1 exploration, have identified a large number of prospective areas, of which the following are notable:
• Otibanda Area
Following up on trenching and rock chip sampling by CRA, TPJ identified three main, gold bearing, lodes which it trenched over strike lengths of 4-5 kilometres. The best trenching results were encountered in the Waikanda Lode where what appears to be continuous mineralisation was intersected along a strike length of nearly 500 metres and across an average width of 1.5 metres averaging 17.5 grammes per tonne Gold. TPJ also completed 17 diamond drill holes whose best results were in the Waikanda Lode including 3.5 metres at 12.2 grammes per tonne Gold at a depth of about 60 metres. In addition to the quartz vein lode style mineralization, data collected from a helicopter-borne magnetic survey in 2010 indicates the possibility of a concealed porphyry beneath the veins.
• Hides Creek Area
Exploration by CRA included 4.5 kilometres of contour trenching and three diamond drill holes. The best trenching results included 35 metres at 2.95 grammes per tonne Gold. The best drill intersect was from surface to 32 metres at 1.25 grammes per tonne Gold. Newmont has re-excavated CRA’s trenches with results that are comparable and include 38 metres at 3.92 grammes per tonne Gold with 2 metres at 47.81 grammes per tonne Gold. The results of an aeromagnetic survey and helicopter assisted BLEG (“Bulk Leach Extractable Gold) sampling conducted by Newmont were sufficiently attractive for it to target the area for its first drilling campaign in 2011. This consisted of 5 diamond drill holes totalling 3,019metres. Although results confirmed the presence of a large porphyry system, there were no significant intersections of economic grade mineralisation (see TPJ press release, 10th February 2012).
• Skarn Creek
Exploration by CRA included three diamond drill holes to test the area’s best geochemical anomalies at Lama Creek. One hole intersected 2m at 42 g/t Au at a depth of about 20m. Reconnaissance BLEG sampling by Newmont has identified a number of anomalous sites west of Skarn Creek which suggest the mineralised district is more extensive than that identified by the CRA work. Skarn Creek may represent a concealed porphyry target with peripheral skarn-style mineralisation.
• Gumots Area
Gumots is located 12 kilometres south of the Wafi-Golpu project. It contains the most interesting anomaly to emerge from a EU funded aeromagnetic survey flown over most of Morobe Province in 2009. The results from the ground field work and the aeromagnetic survey and helicopter assisted BLEG sampling programme conducted by Newmont were positive and sufficient for Newmont to target Gumots as its first drilling target of the 2012 programme. Three holes were drilled however there were no significant intersections of economic grade mineralisation (see TPJ Press Release dated 11th June 2012).
• Other Prospects
Field work by CRA and TPJ have identified Pade, Bayematu and Minewa as other areas worthy of further investigation. Newmont’s BLEG surveys have revealed strong anomalies at Pade, Wiwi Creek, Sier Creek, Kobicka and Ekopa.
2012 Exploration Programme:
Geological mapping, surface sampling, IP surveys, helicopter borne magnetic surveys and completion of the regional BLEG survey were carried out with a view to generating additional drill targets in known prospect areas and to identify new prospects. Exploration expenditures for the first quarter of 2012 have been approximately US$3.5 million.
Newmont has announced that they do not have an exploration budget for 2013 (see TPJ Press Release dated 25th January 2013. In January 2013 Newmont further advised that it had decided to cease exploration activities on the property, and that they were in the process of exploring sale otpions. These options have not proved successful and Newmont has advised that it will now withdraw from the project, after having arranged an orderly close-down. In these circumstances both parties have agreed that any licences would terminate as they came up for renewal, excluding any in which TPJ may have expressed an interest.