By Tom Westbrook and Tom Daly
China's Zijin Mining has warned Papua New Guinea that its failure to renew the lease of a gold mine it jointly owns with Barrick Gold Corp there could damage bilateral relations.
Papua New Guinea on Friday said it would not renew a 20-year mining lease at its Porgera gold mine, citing environmental damage and social unrest even as gold prices have soared to more than seven-year highs.
Barrick (Niugini) Limited (BNL), the local venture in which both miners have a 47.5% stake, suspended operations on Saturday, saying the government had not given it formal notification that it would not renew the lease, or any details of a planned transition.
Zijin, which is a state-controlled company, said that Papua New Guinea needed to conduct negotiations to extend the mining lease in good faith, and that a failure to resolve the issue could impair relations between the two countries.
"As a Chinese enterprise, Zijin would like to contribute to the existing good economic, trade, cultural and inter-governmental relations between China and PNG," Chen Jinghe, chairman of Zijin's board said in a letter addressed to Papua New Guinea's Prime Minister James Marape.
"However, if Zijin's investment in Porgera mine is not properly protected by the PNG government, I am afraid there will be significant negative impact on the bilateral relations between China and PNG," he said in the letter, dated Monday, seen by Reuters. Chen's office confirmed the letter had been sent.
China's Ministry of Foreign Affairs said in a statement to Reuters that the legitimate interests of Chinese firms had to be effectively protected.
It added that Papua New Guinea was a good friend of China's in the Pacific Ocean and that the two countries had maintained good ties.
China's embassy in Port Moresby did not immediately respond to an emailed request for comment. The office of Papua New Guinea's Prime Minister did not respond to a request for comment.
China has steadily increased its influence and spending in the Pacific in recent years, and is Papua New Guinea's biggest creditor, budget figures show.
The BNL joint venture had run into opposition from local landowners and residents. Critics say the Porgera mine has polluted the water and created other environmental and social problems, with minimal economic benefits for locals.
Marape warned Barrick in a social media post on Monday that the government would take control of the mine if it closed during the transition period.
Both miners have said they would pursue all legal means to protect their interests and recover damages.
Zijin also said that it understood the need for greater benefits distribution among governments, landowners and stakeholders.
But if the special mining lease extension is not granted, the mine will be forced to close, the company said.
That would also result in "the removal of the installations and facilities in the mine...(which) would render the mine's operation impossible for years," the company added.
(Reporting by Tom Westbrook in Singapore. Additional reporting by Tom Daly in Beijing. Writing by Melanie Burton. Editing by Gerry Doyle and Hugh Lawson)