17 May 2012
Highlands Pacific 2012 AGM Chairman's Address
Good morning ladies and gentlemen and welcome to the 2012
Annual General Meeting of Highlands
Pacific Limited. I am delighted that you have taken the time
to attend today.
The past year I think I can characterise in some ways as
being two steps forward and one back.
At the Ramu Nickel mine, the long-running court case is
behind us at last and our partners, MCC Ramu NiCo Ltd, are
proceeding with commissioning the three high pressure acid
leach (HPAL) trains at the Basamuk process plant
progressively and in a sensible and orderly fashion. We are
advised that the progress being made on commissioning is very
positive and that Ramu is now proceeding well and in
accordance with expectations. Your company has taken one big
step forward and is about to become a producer, with a small
participation in one of the major nickel mines in the
world.
In relation to the world-class Frieda Copper Gold Project,
the past year has had its highs and lows. The significant
expansion of resources in the last 12 months has further
emphasised that Frieda River is one of the top undeveloped
copper projects in the world. While it was disappointing that
we did not complete and finalise an optimised feasibility
study for the project by the end of last year, Xstrata has
agreed to spend this year on further studies to optimise the
project and its capital and operating costs. The project is
big and requires a large capital investment and we live in
troubled financial times. We must be realistic and patient in
getting the project development parameters optimised for both
the project and the times.
Nevertheless, Xstrata has agreed to carry Highlands' share of
the additional feasibility costs until the project is ready
for development, with repayment ultimately from operating
cash flow from the project. This arrangement has
significantly reduced the near term funding risks for the
project for Highlands, enabling the Company to focus its
resources on other growth options in the immediate
future.
Xstrata's continuing feasibility work will include the study
of using PNG's natural gas supply as a power generation
option for the project, and we believe this could have many
benefits for not only Frieda River but other regional
projects in the longer term. The feasibility work to date has
been monitored by our own consultants who join us in regular
meetings with the study technical team. We await the outcome
of this next phase of the study and continue to encourage
Xstrata to be rigorous and realistic in its optimisation of
the project for the sake of all the stakeholders including
the PNG Government, which has a right to acquire up to 30%
interest in the project when application is made for the
Special Mining Licence.
We are hopeful that following the optimisation process this
year, market conditions will enable the partners to move to
the next stage of the development process as quickly as
possible.
We believe Frieda River is a world-class deposit which can
and should be successfully developed in a timely way, for the
benefit of the shareholders, the Government and the people of
Papua New
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Guinea. We believe the PNG Government shares our objective to
have the Frieda River deposit developed into a mine as soon
as possible.
Finally, at our Star Mountains Project, located to the
northeast of the Ok Tedi Mine, results over the past year
have been encouraging. We have identified a number of high
quality targets for drill-testing and have really only tested
one of these to date, with drilling now progressing on the
next two targets. In the last week we have announced some
exciting news on the latest drill-hole in the program, for
that section of the hole for which we have results. It is
clear from these results that we have discovered a
copper-gold porphyry deposit at the Olgal prospect, with
several other prospects at Star Mountains yet to be explored
by drilling. Much more work needs to be completed before we
can determine whether we have a resource that is capable of
economic development, either at Olgal or elsewhere at one of
the other, as yet untested, porphyry prospects. We are
encouraged by the results of our drilling so far, but it is
early days and we are yet to uncover the true potential of
the Star Mountains property. In the three aspects to our
strategy communicated at our previous Annual General Meetings
we have taken another big step forward with Star
Mountains.
If, as I say, we have taken two big steps forward and one
back, you might legitimately ask why our share price has
taken only backward steps over the last year.
There is no doubt that part of the reason must be attributed
to market disappointment at Frieda not being immediately
ready to go, a disappointment which is understandable and
indeed shared by us.
Another factor is that there has been a considerably
diminished appetite in equity markets for resource stocks in
general, from the large to the small, but it is more
pronounced at the smaller end of the market. The appetite for
risk in the equity markets is very fragile.
There is however, a third reason which we hear regularly in
discussions with the investment community. The issue of
country risk for Papua New Guinea has become a significant
talking point. The lack of constitutional and political
certainty, threats to judicial independence and conflicting
policy statements, some of which would be seriously
detrimental to investment in this country, are issues which
need to be resolved. In our respectful view, it is important
for all stakeholders in this wonderful and exciting country
to be able to look ahead to a clear outcome from an early
election, the end of political and constitutional uncertainty
and the recognition of the independence of the judiciary. I
strongly believe that these issues need to be quickly
resolved in the interests of all Papua New Guinea people.
They certainly need to be resolved in the interests of
shareholders in Highlands Pacific Limited.
I would like to take this opportunity to thank your Managing
Director, John Gooding, and his staff for their continuing
hard work in supporting the objectives of Highlands. John
will be taking you through a detailed explanation of the
status of our projects at the end of the formal business of
this meeting.
Finally I would like to thank you, our loyal shareholders,
for your continued support of our company and look forward to
it continuing.
For further information, please contact:
John Gooding or Craig Lennon
Highlands Pacific - 07 3239 7800
Media Enquiries to:
Simon Jemison
Collins St Media - 03 9224 5319
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ASX Code: HIG PoMSox Code: HIG
Shares on Issue: 686 million Options on Issue: 23 million Performance Rights: 3.5 million
Market Capitalisation ~ A$106m
Cash on Hand (31/03/12) A$12m
Directors
Ken MacDonald, Chairman
John Gooding, Managing Director
Mike Carroll
Dan Wood
Drew Simonsen
Fiu Williame-lgara
Management
Craig Lennon, CFO & Co.Sec Larry Queen, Chief Geologist Terry Smith, GM Mining & BD Peter Jolly, GM Projects
Ron Gawi, GM Port Moresby
For further information, please contact:
John Gooding or Craig Lennon
Highlands Pacific - 07 3239 7800
Media Enquiries to:
Simon Jemison
Collins St Media - 03 9224 5319
Website:
About Highlands Pacific LimitedHighlands Pacific is a PNG incorporated and registered mining and
exploration company listed on the ASX and PoMSox exchanges. Its major development assets include the US$1.5bn Ramu nickel cobalt project, the Frieda River copper gold project and exploration on the highly prospective Star Mountains (Nong River, Mt Scorpion and Tifalmin) licenses approximately 20km north of the Ok Tedi Mine. Highlands also holds exploration ground in the Wau/Bulolo close to the new Hidden Valley and Wafi gold projects.
Frieda Copper/Gold Project*The Frieda copper gold project is one of the Asia-Pacific's largest undeveloped copper/ gold resources. The Project is 175kms north- west of the giant Porgera gold mine and 75km north-east of the Ok Tedi mine. The project owners are Xstrata (81.82% and manager) and Highlands (18.18%). The pre-feasibility study released in November
2010 indicated a 60Mtpa throughput for the first eight years with output averaging 246,000tpa of copper and 379,000 ozpa of gold. The multi-decade life mine will have an average throughput of 50Mtpa.
Star Mountains Prospects*Star Mountains leases, which include Nong River EL1312, Mt Scorpion
EL1781 and Tifalmin EL 1392, are located approximately 20km north of the Ok Tedi Mine. These prospects lie within the highly prospective New Guinean Orogenic Belt, home to deposits like Grasberg, Ok Tedi, Frieda, Porgera and Hidden Valley. A drilling program is underway with some significant copper gold intersections reported.
Ramu Nickel Cobalt MineThe Ramu nickel mine is located 75km west of the provincial capital of
Madang, PNG and will produce an annual output of 31,150 tonnes of nickel and 3,300 tonnes of cobalt contained in high grade concentrate over a 20 year mine life. The mine is currently being commissioned and the mineral resources at Ramu have the potential to increase the mine life by a further 15-20 years. Highlands 8.56% interest in Ramu will increase to 11.3% at no cost after repayment of the project debt (estimated to be 8 years). From commissioning, Highlands has access to its pro-rata 8.56% share of Ramu's post-debt servicing net cash flow. Highlands also has an option to acquire an additional 9.25% at fair market value which could increase its interest to 20.55%.
* Subject to the right of the Independent State of Papua New Guinea to acquire up to a 30% equity interest in any mining development in the country.
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