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Papua New Guinea warns Barrick over gold mine control

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MELBOURNE, April 28 (Reuters) - Papua New Guinea has threatened to take control of a gold mine operated by Barrick Gold Corp in the country after Barrick's local unit suspended operations at the weekend following news the mine's lease would not be renewed.

Barrick, one of the world's biggest gold miners, had applied for a twenty-year lease renewal with its joint venture partner, China's Zijin Mining, of the Porgera gold mine which Papua New Guinea rejected on Friday.

The Toronto-listed company had run into opposition from Papua New Guinea landowners and residents. Critics say the Porgera mine has polluted the water supply and created other environmental and social problems, with minimal economic returns for locals.

Barrick says the lack of renewal is tantamount to nationalization. Its local unit, Barrick (Niugini) Limited, suspended operations on Saturday because the government had not given it any formal notification that it would not renew the lease, or any detail over a planned transition, it said.

Barrick and Zijin each own 47.5% of the mine, with the remaining 5% held by landowner group, Mineral Resources Enga.

Prime Minister James Marape warned Barrick in a social media post late on Monday that the government would be forced to take control of the mine if it were to be closed during the transition period.

"My letter will ask Barrick to continue operating the mine when we go through this phase, but if you sabotage or close the mine, you leave me no choice but to invoke orders to take over the mine for the sake of land owners and provincial government," he said.

"Work with me for your ease of business during this transition and exit phase," he said "To all PNGeans bear with me, short term pain for long term gain."

Both miners have said they would pursue all legal means to protect their interests and recover damages.

The closure comes as gold prices have soared on the back of central governments printing money to stave off the worst of the economic downturn, hitting the highest in more than seven years at $1,746.50 an ounce mid-month. Gold traded last at $1,708 at 0932 GMT.

Zijin on Monday lowered its gold production target for 2020.

Barrick told Reuters late last year that the mine had the potential to become a tier one asset.

Barrick's tier-one designation, used describe a mine capable of producing 500,000 ounces of gold annually for at least 10 years at low cost, would place Porgera in league with Barrick's crown jewel assets at a time major gold miners are desperate to replace shrinking reserves.

Barrick and Zijin's combined 2018 production at Porgera was around 421,500 ounces.

(Reporting by Melanie Burton in Melbourne and Tom Westbrook in Singapore, editing by Louise Heavens)

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