Sun, May 01, 2011 - Page 10 News List

Solomons’ gold set to reshape South Pacific nation

As the timber and fishing industries decline in the Solomon Islands, the government is seeking miners to return to the country after strife drove them out a decade ago

By James Regan  /  Reuters, HONIARA

Two workers talk next to trucks before the reopening of the Gold Ridge mine in the Solomon Islands on March 4.

Photo: Reuters

Elijah David traipsed the 55km in plastic sandals from his home in Guadalcanal Province to the only gold mine in the Solomon Islands, hoping to find work that may transform his life and that of his South Pacific island nation, for better or perhaps worse.

It had taken a decade to rebuild the mine after warring tribespeople from another province, bent on maintaining an agrarian society in the Solomon Islands, chased workers away with machetes and destroyed just about everything in sight.

When it opened last month with a workforce of about 550, mostly local people, the mine’s Australian owner predicted it would soon account for about one-third of the Solomons’ GDP. Skeptics, however, point to cautionary tales following mining booms in the South Pacific.

Take the nearby Republic of Nauru, the South Pacific’s poster child for a mining frenzy gone wrong. After decades of phosphate mining, Nauru had the world’s highest GDP per capita, only to go broke once its reserves were mined out, leaving a legacy of widespread squalor and a mostly unemployable workforce.

Nothing that drastic is likely to happen to the Solomon Islands, home to about 1,000 islands and 523,000 people.

The Solomon Islands can still count on strong demand for palm oil and copra — the dried white flesh of the coconut used to make coconut oil — even as its exports of timber and fish wane.

On his journey, David passed the reminders of that economy and a subsistence lifestyle that persists 33 years after independence from Britain. Women cook yellow fish and burnt-black potatoes smoldering in roadside umu pits; men weighed down with coconuts and pineapples trek to village markets.

“Everybody here fishes or grows food. It’s how we make our living,” said David, who grows pineapples.

However, decades of logging and the steady depletion of fish stocks have led Solomon Islander Prime Minister Danny Philip to single out mining as the new growth engine.

Philip couldn’t have picked a better time. Gold prices have never been higher and industrial staples such as copper, zinc and nickel have also soared thanks to a seemingly insatiable appetite for raw materials to feed the mass urbanization in Asia.

The Solomon Islander Ministry of Mines, Energy and Rural Electrification has warned “dormant mines and mineral investors” to demonstrate a willingness to invest in the sector or have their licenses revoked and handed out to others.

“Now is the time to make hay in the mining sector,” Mine Life analyst Gavin Wendt said. “China is buying all the metal it can and demand is strong elsewhere too.”

The Gold Ridge mine consists of four open pits in the jungle-draped hills southeast of the port capital of Honiara. The mine, which reopened last month, meant relocating and building new homes for people in 27 villages in the area, the mine’s operator Allied Gold Ltd said.

“We see opportunities in the South Pacific which I believe has been under-explored over the years,” Allied Gold executive chairman Mark Caruso said in an interview in the Solomons.

Allied Gold, which has a market capitalization of about A$700 million (US$768 million), also has a mining operation in neighboring Papua New Guinea. It is listed on stock exchanges in Australia, Canada and Britain.

Allied says it aims to produce 120,000 ounces (3,402kg) a year from the Gold Ridge mine — that would come to about US$183.6 million at current gold prices — and expects the mine to run for at least 10 years. The company says it is also exploring for new deposits of gold as well as copper that could extend the life of the Gold Ridge mine.

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