Financial crisis delays Solomons gold mine

Updated February 19, 2009 15:16:24

The international financial crisis is delaying the Gold Ridge mining project in Solomon Islands. At the end of last month the mine owner, Australian Solomons Gold, succeeded with a 10-million US dollar private share placement. But, despite strong interest from commercial banks prior to the financial crisis, the company is now having to turn to other sources of debt funding.

presenter: Jemima Garrett
Speaker: David Roach, Chief executive Officer of Australian Solomons Gold

GARRETT: The Gold Ridge mine is one of those mid-sized projects which is seen by the Solomon Islands government as crucial to the nation’s future.

At the moment Solomon Islands relies heavily on log exports but with those exports due to fall dramatically in the next 5 years as the logs run out, it is now urgent new sources of jobs and foreign exchange be found.

That is where Gold Ridge comes in.

After an abortive start to mining before the ethnic tensions in 2000 it's has taken almost a decade to put the project on the map. It now employs 150 Solomon Islanders and has plans to employ many hundreds more once commercial mining begins.

But first it must obtain financing.

Australian Solomon's Gold CEO, David Roach, says the 10 million US dollar private share placement is a good first step but the environment for bank financing is causing delays.

ROACH: Certainly since the financial crisis commenced last year, the commercial bank market has been difficult, but certainly we've attempted to try and we are discussing with other agencies with regard to financing per se outside the commercial debt market.

GARRETT: So you're looking I understand to some of the multilateral agencies. Are they likely to come to the party in terms of providing finance to get the project up and running?

ROACH: Well, we are talking with them, so it's a process which we need to have a fair involvement with them and we are going down a particular path at this stage. So there are numerous parties we are talking to at this stage.

GARRETT: Gold is one of the very few commodities to emerge from the financial crisis up, rather than down. Why is it that you're still having problems with the debt financing and the banks?

ROACH: Well, it's not so much as a function of the gold market being buoyant and the fact that has not been I supposed received in terms of positive debt financing. I suppose it's just that the culmination of the financial crisis per say has been wide and large, in terms of the mining finance industry. So on that score, mining finance is a difficult tasks, notwithstanding that the gold market has been quite buoyant of recent times.

GARRETT: So you're saying that even if you've got a good project, finance is still tight?

ROACH: Yes, I think that's correct. We believe we've got an excellent project, excellent potential going forward, but sure, mining finance is a very tight commodity indeed.

GARRETT: How confident are you that you will be able to put the financing together for this project?

ROACH: We're optimistic that we can establish a framework for going forward, so I would say we are optimistic.

GARRETT: You had hoped to begin production in the first quarter of 2010. What's your time frame looking like now?

ROACH: Well, we would like to think that if all goes according to plan, that we might be able to look at quarter two to quarter three, 2010. So that is something that we are working towards as a milestone going forward.

GARRETT: And what will the project mean to Solomon Islands in terms of jobs and government revenue?

ROACH: Certainly jobs, we see probably an increment of 450 people on site in the Solomon Islands. There will be a significant income streams from royalties and the like which will go to the Solomon Islands Government and so that will enhance the Solomon Islands per se going forward.

GARRETT: Both Australia's Prime Minister, Kevin Rudd, and Solomon Islands Prime Minister, Derek Sikua, have shown their support for the project. To what extent has that helped?

ROACH: Oh look, it is most beneficial, we're very welcoming that by those governments placing their imprimatur over the projects, gives a good avenue going forward which allows us a clear pathway in terms of development process.