Mining Firms Finding Gold Along Ring of Fire : U.S., Foreign Companies Join Pacific Rush

In a remote part of Western Australia, a two-hour drive from the nearest town of Meekatharra, Homestake Gold of Australia Ltd. is building a water supply for a small town it is developing to support its gold find.

When gold production starts late this year at the Fortnum mine, workers will be flown into the remote location on a rotating basis.

Meanwhile, northward across the India Ocean, Newmont Mining’s Australian subsidiary is exploring for gold on four islands of Indonesia. The Denver company is also searching for the precious metal in Papua New Guinea.

Welcome to the Pacific gold rush.

American mining firms, along with Canadian, Australian, British and European companies, are scouring a region stretching through Indonesia, New Guinea, Fiji and south to New Zealand for gold. The countries are situated along a volcanic belt that geologists call the ring of fire.

“There is a lot of gold associated with this ring of fire,” explained John R. Parry, senior vice president of Newmont Mining Corp. in Denver. The frenzy of exploration efforts peaked last year. “A lot of the companies are now spending their time evaluating the properties they have, rather than purchasing new properties,” Parry said.

“Some $2 billion to $3 billion worth of mining projects are already under way in the Asia-Pacific region, and another $7 billion to $10 billion worth of projects are awaiting development or expansion,” said Allen L. Clark, director of the minerals policy program at the East-West Center’s Resources Systems Institute in Honolulu.

The U.S. government believes that there may be a greater role for American mining companies in the Pacific in minerals other than gold. Clark is heading a yearlong study funded by the U.S. Trade and Development Program to identify business opportunities in the Pacific region for American mining companies.

He said that although gold is the most sought-after mineral in the region, others to be tapped include nickel, platinum, aluminum, manganese, copper, tin, tantalum and titanium.

At least one huge gold project, Ok Tedi Mining Ltd. in Papua New Guinea, is now mined primarily for copper. “We completed gold ore mining in the third quarter in 1988 and switched to copper mining,” said Ralph E. Anderson, general manager for mining at Houston-based Amoco, which has an interest in Ok Tedi along with Broken Hill Proprietary Co. of Australia and three West German firms.

A byproduct of the copper smelting process is gold, which “is still a significant source of our revenues,” Anderson said. At peak production, Ok Tedi produced 500,000 ounces of gold a year.

The rush into the Pacific for gold began in the late 1970s, when gold prices shot up dramatically and the technology for gold retrieval, developed by U.S. firms, made it easier to extract the gold there.

The price of gold hit a record $878 an ounce in January, 1980, but plummeted below $478 two months later. Prices have averaged $420 for the past eight years, compared to $132 in the 1970s, according to Metals & Minerals Research Services, a London metals consultant group.

“Production has been increasing significantly in the last several years,” said John B. Roberts, managing director of Homestake Gold of Australia Ltd. in Adelaide. “Two things might start to level things out. The first is the fall of gold prices recently. Second, the decision by Australia to introduce corporate taxation on income from gold mining beginning in January, 1991. Up until now, income from gold has been tax-free. There will be some smaller operations that will not continue or go into production. The backbone of production will come from the larger corporations.”

Lihir Island, off Papua New Guinea, is expected to yield huge amounts of gold for its developers, BP Minerals America, formerly Kennecott, and its Australian partner Niugini Mining Ltd.

“There is no doubt that there is a significant gold find there,” said Frank L. Fisher, director of external affairs for BP Minerals in Salt Lake City. “But how much and how we’ll approach future development is unclear.”

The Porgera deposit in Papua New Guinea, a joint venture of Canadian and Australian interests, “is going to be one of the largest gold mines in the world,” according to Clark at the East-West Center. “It has reserves of about 77 million tons of ore, or four grams of gold per ton.”

Homestake’s Fortnum mine in Western Australia will yield 50,000 ounces of gold a year. The company, a unit of San Francisco-based Homestake Mining Co., is expanding its Kalgoorlie Mining Associates venture in Australia to increase gold production to 800,000 ounces a year by 1991 from its current 250,000 ounces. The expansion will make Kalgoorlie the world’s 10th-largest gold mine.