MP sues Newcrest over PNG goldmine

From The Australian

January 07, 2011 12:00AM

NEWCREST Mining's Hidden Valley gold project in Papua New Guinea faces more problems with landowners.

The local member of parliament served a fresh writ against the three-month old mine over flood damage to crops.

The 50-50 joint venture between Newcrest and South Africa's Harmony Gold Mining, known as Morobe Mining, says it will vigorously defend any legal action.

The writ alleges mine-related sediment in the Watut River has created a nuisance and seeks damages and injunctions in relation to the Hidden Valley operations, Morobe said.

Since November, Newcrest and Harmony have been making voluntary compensation payments to communities on the Watut for flood damage to crops and gardens.

Morobe says mine-related sediment, along with landslides and rain, may have contributed to the damage.

According to Morobe, the sediment that entered the Watut from the mine was run-off from mine overburden and construction activities.

Seeking to distance itself from the tailings problems that caused BHP to hand over the Ok Tedi copper mine in PNG in 2002, Morobe stressed it would store tailings and that no mine processing residue or tailings were being discharged into the Watut.

The Hidden Valley mine, which started production in October, is about 300km north west of Port Moresby, in the province of Morobe.

The local MP, Sam Basil, has criticised the PNG environment department and its minister for giving Hidden Valley an environmental permit.

On December 16, Newcrest informed the stockmarket that a writ served by Mr Basil in the National Court of Papua New Guinea had been withdrawn after the establishment of a technical advisory panel to resolve sediment-related issues.

But Mr Basil appears to have changed his mind since then. "The pending legal action now prejudices the ability of the member and his legal adviser to participate in this process," Morobe said yesterday.

The new writ was served on behalf of Mr Basil and a number of traditional landowners living along the Watut River.

Morobe said the compensation payments, of which Mr Basil had been aware, appear to have prompted the writ.

Yesterday, Newcrest Mining shares fell 58c to a three-month low of $39.26, in line with other gold stocks on the ASX.

Hidden Valley is expected to produce 250,000 ounces of gold a year for 14 years from two open pit mines