Gold prices

plunge as kina devalues

By Brian Tobia

The plunging gold prices are threatening PNG’s already troubled econo my and the government is worried.

The bulk of the government’s earnings (about 72 per cent) that support the budget, is obtained from the mineral resource sec tor, particularly from gold, copper, silver and petroleum products.

And the declining gold prices seems set to hit government coffers and threaten the early development of mining projects as well as outing vital exploration expendi ture. The declining gold prices has set the government worrying about possible impacts on foreign exchange and Mining Minister, Masket langalio intends to seek audience with the industry on how to deal with the slump.

Central Bank experts say there was some income protection for mining com panies by delaying the sale of gold at low prices while most had some level of for ward selling protection. Low prices will essentially mean loss of foreign earnings for the government, and it will therefore affect the revenue and then the budget.

Gold is now trading at a historical low of around SUS27O an ounce and this has the potential to severely damage PNG’s gold industry. Minister langalio is seeking views of the industry on how best to cope with the impact of the slump in the internal gold prices because the falling gold prices would impact on the government coffers.

According to Minister langalio, he has written to the PNG Chamber of Mines (resource sector representative) and all the gold producers in the country to seek views on how the government can assist in overcoming difficulties arising from the poor gold price. He said the low gold prices also has the potential to threaten the existence of mining projects

(developing or developed and already

into production).

He said the mining industry is an inte gral part of PNG’s economy, a major employer and distributor of national wealth through the economy. Mr langalio says he is of the view that players in the mining industry are already taking steps to deal with the impact of the lower returns on gold sales - “this involves greater effi ciencies in processing but sadly also the loss of many jobs through cost cutting”.

He said PNG is now witnessing a slump in exploration which is likely to cause a decline in exploration expenditure and other long term impacts. “In the short

term, exploration often impacts positively

on employment and village economies and in the long term web needs to keep prov ing up existing ore bodies and finding new projects as existing mines all have finite lives,” he added. The government has a role in looking at ways to assist the indus try in lifting efficiency,” said Mr langalio.

PNG produces over 70 tonnes of gold annually and is rated one of the world’s producers. ■