Highlands Gold on top but cautious

HIGHLANDS Gold Ltd has reassured shareholders that no further significant borrowings would be needed for the Porgera venture, but at the same time directors have warned about the sharply deteriorating law and order situation in Papua New Guinea.

The good news dominated for the Papua New Guinea miner and explorer when it held its annual general meeting recently. The company had announced two months previously that the June 1990 year had seen a maiden profit, but has now revealed its profit for the September quarter was about K. 2 million (USS2.I2 million), with interest earned being the prime source of profits.

Chairman Norman Fussell told shareholders at the meeting that gold was being produced at Porgera for an extraordinarily low USS6S an ounce. At the Wild Dog prospect in the East New f 'cash s[niDD C d ‘TT'R ' aS ' HrT a cash-strapped City Resources Ltd, Highlands reported that drilling results revealed outcroppings with significant (Told rnntpnf ° Highlands was floated to acquire all the Papua New Guinea operations of MIM Holdings Ltd, with the parent still holding a 65 per cent stake. The Porgera mine in the Papua New Guinea highlands is the centrepiece of its activities.

Highlands Gold has 30 per cent of the project, as does Renison Goldfields Consolidated Ltd and Placer Pacific Ltd, with the Papua New Guinea Govern ment holding the other 10 per cent.

Fussell told the company’s annual meeting that directors were concerned about the declining state of law and order in the country. He said it was essential that the government in Port Moresby continued to address the prob lem and maintain the political will to act.

“The continual political manouevrj ng) w ;,h threats of votes of no confi denre is indeed a concern to rhe board ”

Fuss e |l said ’

Paniia Npw Guinea was on the befits of new resource developments Porgera, the Hides gas field and the Kutubu oil project - and about to host the South Pacific Games, both of which should galvanise the country.

“The outside world is watching and seeking reassurance that the country can surmount its problems and prosper,” said Fussell While Highlands Gold could not affect the course of events in Papua New Guinea, it could formulate strategies to minimise their effects. “We must be able to live and work in the country,” he said.

The closure of the Bougainville Cop per Mine had significant repercussions in

the world’s financial centres, and Papua New Guinea had to work to re-establish its reputation, he said.

Fussell also told shareholders that revenue from the Porgera gold mine is now almost covering the company’s spending obligations on the project. This meant that only minor further borrowing would be required until other mine developments go ahead.

Total borrowings of the company have reached K 81.6 million, and Highlands expects that only minor further borrow ing will be necessary while Porgera Construction and development stay on schedule.

“I should also point out that, with K 84.2 million in cash, Highlands Gold has effectively no net debt, an enviable position for a company that has just helped to fund one of the world’s largest gold mines,” said Fussell.

Highlands had hedged about half its share of the first two years of production from Porgera about 234,000 ounces at a net selling price of SUS42S an ounce, compared with a gold price on the day of the annual meeting of USS3B7 an ounce.

The company plans to spend 4.5 million kina on exploration in the current financial year. Further work is planned at the Wild Dog prospect to outline the mineable resource, and further acquisitions in Papua New Guinea are planned. The company currently has 30 properties 22 of which Highlands was the operator. □