Company now poised to start mining again

Rowan Callick




 
Colourful West Australian Mark Caruso holds much of the economic success or failure of Solomon Islands in his hands.
For the country’s economic fortunes have come to be symbolised by the rise or fall of the Gold Ridge mine.
And the mine’s future depends today on Caruso’s cash, connections, and above all his experience in running mines in developing countries.
When Spanish explorer Alvaro de Mendana de Neyra arrived at the major island in the nation, Guadalcanal, in 1568, he named the group Solomon Islands after the king of Israel who had built a great temple in Jerusalem and adorned it lavishly with gold.
Mendana’s expectation that these islands held huge amounts of gold, was probably excited by being brought nuggets washed down by the Chovohio River, which emerges into the sea, just east of the present capital, Honiara.
The people who live along the river, heading up towards the Solomons’ highest mountain, Popomanaseu, which reaches 2,335 metres still pan for gold today.
The modern mine is of course sitting on the source of that gold, in the mountains.
In the late 1990s, the mine was developed by Ross Mining. The project came under fire from Brisbane based mining entrepreneur Denis Reinhardt and his Australian law firm Slater and Gordon. Their dispute wound up eventually in the Solomons’ Court of Appeal, which found for Ross.
The mine, which produced gold from 1998 to mid 2000, was by then providing about 30 percent of the country’s entire income.
But the bitter dispute with Reinhardt and Slaters, and the start of the violent ethnic conflict in the country, undermined Ross’ success, and the company was taken over by Delta Gold a decade ago.
After numerous changes in ownership since then, Gold Ridge Mining Ltd is now poised to start mining again, under its new owner Allied Gold Ltd, chaired by Caruso, which is pouring A$160 million in to its redevelopment.
First, it was vital to tackle issues that had remained unresolved since the three-year “tensions” – the acceptable contemporary gloss on the brutal, bloody war between rival gangs that hijacked the nation in the early 2000s.
Recently, Caruso presided over a traditional chupu, exchange of gifts of food including pigs, and of shell money, by which the company said sorry—on behalf of its ultimate predecessor, Ross Mining—that it had invited the Rapid Response Unit (RRU) to protect the mine’s assets.
During the ceremony, he also presented Prime Minister Derek Sikua with a spade with a golden blade.
The RRU had a confrontation with villagers, in which three people died. Now, the final reconciliation ceremony is awaited, between the rival ethnic groups, those from the island of Malaita—who played a prominent role in the RRU—and the local, Guadalcanal people.
During the years of anarchy in Solomons, the notorious gang led by multiple murderer Harold Keke made the mine site its base for a while, after walking across the mountains from the Weather Coast.
After a peace accord was struck, and commercial activities started to return to normal, much of the undefended mine’s equipment was pulled apart and taken away. Many businesses in nearby Honiara are said to have benefited, knowingly or not.
There are about 2,000 people living within the mining lease, in 356 homes, and the company is re-housing them all, costing A$8-A$10 million. It has built three display homes, from which they can select the basic style they prefer. Chiefs’ houses are better appointed.
The inhabitants identified 54 tambu or sacred sites when Ross developed the mine. Now, they have located 192—to be protected from mining activity.
The most special site is the tall jungle outcrop known as the Obo Obo, a centre of activity of the spirits, where young members of the tribe used to be initiated. The main mine road bends around it.
Dick Douglas, the chairman of the Gold Ridge community landowners’ council—also a traditional leader, whose thatch-roofed home is close to the Obo Obo—says that the people in the area are keen to see the mine back in production, chiefly because of the services and the infrastructure it provides.
“We went backwards again when the mine stopped. But now we will have clinics in our area, and a road so that we can take our produce to markets,” he says. It used to take a week to walk to Honiara; now, about an hour by vehicle.
And they will receive royalties—which rise with the price of gold, a factor spurring the current enthusiasm to get the mine going again, with the price soaring.
At the start of the original process, back in the 1990s, Douglas walked from village to village with a plastic bag of documents, explaining the process whereby the mine was to be established, and appealing for everyone with a claim of land ownership to come forward.
“There was ample time for all the members of the tribe to lodge their claims,” he says. “At the end of the day we were able to resolve the claims amicably among the tribe.”
Caruso also stresses the importance of resolving issues with people living downstream of the mine. They wash and bathe in the river, he said, and even if they become prone to disinformation about water quality, they must be taken seriously and their questions addressed.
“My company’s position is clear,” he says. “We shall be decisive in dealing with these outstanding issues, in establishing credibility and trust.”
The tailings were pumped down from the mine, while it was operating, to a dam, where 10 years of water has since accumulated, and is now being pumped out.
Future tailings will not pollute the river Chovohio, the company stresses.
Caruso, a youthful 48, stresses that managing expectations is a crucial element of running such projects successfully. He says it is “refreshing that landowner groups here are very structured.”
He has also worked in different parts of Africa since the early 1990s, including Ghana, Sierra Leone and South Africa.
The World Bank and other major development banks have produced massive reports on Gold Ridge, which they want to offer stand-by credit. Caruso says he preferes to stay debt free as well as hedge free.
He quotes the American bank robber of a century ago, John Dillinger: “We live our life like we’re going to die quickly.”
He says: “It’s an economic adventure. We will responsibly redevelop this mine, produce gold, and make a return to our shareholders. Is there pressure on me? Absolutely. But we’re making an outstanding start here.”
Importantly, he has established sound credentials in Melanesia by building and operating successfully a gold mine in the Solomons’ neighbour, Papua New Guinea, at Simberi, an island 65 km south-west of the large Lihir gold mine in New Ireland province—the first junior miner to establish a greenfields mine in PNG for a long time.
Communication, says Caruso, is crucial and so is logistics. “The myth is always greater than the fact in the South Pacific.”
He isn’t big on formality. He wears snakeskin boots and looks less comfortable in a suit and tie than the Solomon Islands politicians he invited to the recent reconciliation event—which dominated the media there for days.
His family’s business is private contracting, especially for mining companies—including building railways. “But I got tired of working for other people and became ambitious to build my own gold mine.”
He personally helped lug off the boat, the first 44 gallon oil drum landed at Simberi and used the first gold bar produced there as a doorstop in the office, where he could glance at it—until he was persuaded to place it somewhere safer.
Simberi was originally conceived as a 30,000 ounces of gold a year mine. Then it was upgraded to 80,000 ounces, originally for eight years and now for 10. Allied operates its own boat to service the mine.
“We have to be independent,” says Caruso—“including of government. In fact, a mining company in a developing country has to be the social arm of government, you have to be a proxy government.”
In PNG, he says, landowners have many examples—for good or ill—of how to relate to mines. “Here, it’s new. And the government needs to be guided too. In PNG, royalties are disbursed unaccountably to non-incoporated groups. Here, the problem is that the money has to go first to government, then back to the people.”
The only issue causing a stir right now, is the company’s hiring of Fijians to take charge of security at the mine site, a move which also caused some controversy at Simberi. The people living near the mine say their young people should also be given a chance to take such jobs.
Caruso grabs the keys of a company ute and drives around the site, past a sign which jungle vines are now enfolding that says: Blasting Times. Beyond it, is the first of four pits dug by the original mine.
This will also be where mining will start soon, in an open cut, with the rock taken to the crusher by aerial rope conveyor belt rather than by truck along haulage roads.
It’s very high grade, says Caruso, who anticipates obtaining 220,000 ounces within the first 20 months. And handily, only an hour away from Honiara’s international airport by road—a very novel location for a mine, usually remote from modern infrastructure.
The mine is sitting on a volcanic basin, and is located within a vast exploration lease area of 130 sq km, which holds high prospects for further finds.
Gazing over the mine site area, 500 metres high and thus slightly cool, he says: “This is just beautiful.”
As Caruso drives along the road down from the mine to the airport, he spots Titus Soba, a leading landowner, whose brother was killed in the fighting a decade ago.
He stops to shake hands and chat. Soba is busy organising a group from his village to keep the tropical foliage away from the pipe to the tailings dam—earning money that they mostly pass on to the local church.
Sikua, the former head of the country’s education department, says: “I had to tell Caruso when he first arrived—look, mate, you’re taking over, but we have to understand how you see your work.
“He came through to me, direct from his experience at Simberi in PNG, with full knowledge of what he’s faced with. OK, I said, we will work with you—if not, you’ll have to go out the door you came in.
“And he has come good. That’s what I am happy about. He came with me in my car to lunch after the ceremony at the site. I pressed on him, mate this is not the end, it’s just the beginning, and he said we know full well what you mean.”