Gold Mountains (H.K.) International Mining Company Limited provides $301 million shareholder loan for BNL Porgera Gold Mine Project

Project narrative

On May 26, 2015, Zijin Mining Group Co., Ltd. and Gold Mountains (H.K.) International Mining Company Limited — a wholly owned subsidiary of Zijin Mining Group Co., Ltd. — entered into a share acquisition agreement with Barrick Gold Corporation of Canada and Barrick (PD) Australia Limited (a wholly-owned subsidiary of Barrick Gold Corporation of Canada) to purchase a 50% equity stake in the Porgera Gold Mine Acquisition Project for $298 million. Then, on August 31, 2015, Zijin Mining Group Co., Ltd successfully acquired the 50% equity stake in Barrick (Niugini) Limited [BNL]. After the transaction was completed, Barrick (PD) Australia Limited and Gold Mountains (H.K.) International Mining Company Limited, a subsidiary of Zijin Mining Limited, each held a 50% equity stake in Barrick (Niugini) Limited [BNL]. Under the terms of the acquisition, Gold Mountains (H.K.) International Mining Company Limited assumed responsibility for a $198,000,000 shareholder loan that Barrick Gold Corporation of Canada had previously issued to BNL (which held a 95% equity stake in Barrick Niugini Limited Mineral Resources Enga Ltd. — the actual owner of the Porgera Gold Mine Mine Project — at the time of the acquisition). The other 5% equity interest in Barrick Niugini Limited Mineral Resources Enga Ltd. was held by Mineral Resources Enga Ltd. [a 50:50 joint venture between Porgera Gold Mines Limited (formerly: Kupiane Yuu Anduane Company Limited) and Enga Provincial Government that is managed by a state-owned enterprise known as Mineral Resources Development Company (MRDC)]. Then, in June 2020, Gold Mountains (H.K.) International Mining Company Limited — a wholly owned subsidiary of Zijin Mining Group Co., Ltd. — signed a shareholders’ loan agreement with BNL — a joint venture of Gold Mountains (H.K.) [50% equity stake] and Barrick (PD) Australia Limited [50% equity stake] — and Barrick (PD) Australia Pty Limited, for providing shareholder loans to BNL in proportion to their respective shareholdings. The maximum shareholder loan limit was initially set at $63,000,000 with a maturity date of June 30, 2021. The shareholder loans were interest-bearing at an agreed interest rate and unsecured. Later, a series of supplemental agreements were entered into to modify the maximum limit and maturity date of the loans. In December 2023, the three parties entered into a supplemental agreement to modify the maximum limit of the loans to $823,600,000 and the terms of the loans to no fixed terms of repayment. As of December 31, 2023, the outstanding principal balance of the loans provided by Zijin International Capital to BNL was $2,590,459; the outstanding principal balance of the shareholder’s loans provided by Gold Mountains (H.K.) to BNL was $301,000,000; and the total interest receivables amounted to $19,523,534. The Porgera gold mine is located in the Porgera valley area in Enga Province, western Papua New Guinea. It is 130 kilometers away from the west of Mount Hagen, a western city of Papua New Guinea, and 600 kilometers away from the northwest of the capital, Port Moresby. From the completion of construction and commencement of production in 1990 to the end of 2014, accumulated gold production at the mine has reached 18.81 million ounces (585 tons). It still possessed, at the time of 2015 acquisition, a production capacity of 400,000 ounces of gold per year with the ability to continuously produce for more than 10 years. The processing plant of the Porgera gold mine also had the capacity to process 6 million tons of crude ore per year. Techniques used in processing include crushing, grinding + reprocessing, flotation processing, hot-pressure oxidation, cyanidation carbon-in-pulp leaching, desorption of gold-bearing carbon and electrodeposition. 2 inductance furnaces are used for gold refining, casting gold bullions which contain 80% of gold. Conventional techniques were used in floatation processing of ore. Hot-pressure oxidation was used for flotation selection of concentrates, which is a very mature technique and is commonly used in the projects operated by mining companies in western countries. The hot-pressure oxidation facilities of the Porgera gold mine could process 288 tons of gold concentrates daily with 100% automatic operation. The recovery rate of the whole process of processing and metallurgy of the mine was 85%-88%. This project financially underperformed vis-a-vis the original expectations of Zijin Mining Group Co., Ltd. A special mining license (SML) held by BNL through Barrick Niugini Limited Mineral Resources Enga Ltd. expired on August 16, 2019. BNL filed an application for the extension of the SML for 20 years before its expiry on June 29, 2017. On April 24, 2020, the PNG Government made the decision to reject the application for the extension of the SML of Porgera. At the same time, BNL received a notice of assessment from the Internal Revenue Commission of PNG, which required BNL to pay $131 million (excluding penalty) of taxes for the period from the years 2006 to 2015. On June 30, 2020, BNL responded with an objection. On October 2, 2020, BNL received an adjusted notice of assessment from the Inland Revenue Commission, which required BNL to pay a total of USD485 million of taxes and penalties for the period from the years 2006 to 2015. BNL considered the tax audit adjustment issued by the Inland Revenue Commission of PNG to be unwarranted, and it opposed to the adjusted tax assessment again on November 30, 2020. Zijin Mining Group Co., Ltd. completed the acquisition of 50% equity interest in BNL at the end of August 2015, and a substantial part of the above-mentioned tax audit period precedes Zijin Mining Group Co., Ltd.’s acquisition of BNL. In accordance with the relevant agreements between Zijin Mining Group Co., Ltd. and Barrick Gold Corporation at the time of the acquisition, potential tax liabilities incurred prior to the acquisition were to be borne by Barrick Gold Corporation. On April 9, 2021, BNL signed a legally binding framework agreement with the PNG Government and Kumul Minerals Holdings Limited (a state-owned mining company in PNG, “Kumul Mining”), aiming to reopen the Porgera Gold Mine. On September 13, 2021, Porgera (Jersey) Limited (“PJL”) was established in Jersey Channel Islands (“Jersey”) by Jinyu (H.K.) International Mining Company Limited (“Jinyu (H.K.)”), a wholly-owned subsidiary of the Zijin Mining Group Co., Ltd. Barrick (PD) Australia Limited and Zijin Mining Group Co., Ltd. each held a 50% interest in Barrick Niugini Limited Mineral Resources Enga Ltd. Zijin Mining Group Co., Ltd. and Barrick Gold Corporation had joint control over PJL. On February 3, 2022, BNL, the PNG Government, Kumul Mining, MRE and PJL officially completed the signing of the Porgera project commencement agreement (the “PPCA”). The PPCA provided more details for the framework agreement, which provided that ownership of the Porgera Gold Mine would be held 51% by PNG stakeholders (the PNG Government, Kumul Mining and MRE) and 49% by PJL. BNL would remain the operator of the mine and BNL could transfer the transferable assets and operating liabilities to Barrick Niugini Limited Mineral Resources Enga Ltd. as consideration for Barrick Niugini Limited Mineral Resources Enga Ltd.’s 49% interest in the project company New Porgera Limited (NPL). The PPCA also provided that PNG stakeholders and BNL would share the economic benefits generated over the life of mine on a 53%/47% basis, and the PNG Government would retain the right to acquire the remaining 49% of the Porgera Gold Mine from BNL after 10 years. At the same time, the PPCA provided that the full resumption of production at the Porgera Gold Mine remained subject to the completion of a number of definitive agreements. Other conditions and agreements to be fulfilled included an operating agreement for the operation of the Porgera Gold Mine by BNL, the application for new mining rights to be made by NPL (after its creation), a mine development contract and the final resolution of tax matters, among others. On September 22, 2022, PJL cooperated with other PNG parties to establish NPL, which provided that ownership would be held 49% by PJL and 51% by PNG stakeholders. On June 20, 2023, BNL, Barrick Gold Corporation and the Internal Revenue Commission of PNG entered into a settlement for the original $485 million in taxes and penalties, which was negotiated and ultimately coordinated that BNL would be required to pay approximately $57 million in back taxes, of which $35 million would be paid in cash by BNL, with the remaining $22 million would be settled by way of offsetting tax refunds receivable. In the event that the tax refunds receivable of BNL as approved by the Internal Revenue Commission of PNG was less than $22 million, BNL would be required to pay the remaining tax, and Zijin Mining Group Co., Ltd. and Barrick Gold Corporation agreed that they would each be liable for the amount and discharged from their remaining rights and obligations under the original acquisition agreement. On October 13, 2023, the PNG Government signed a new special mining lease (the “New SML”) with NPL for a period of 20 years from the date of issue. The Zijin Mining Group Co., Ltd.’s 47.5% interest in the Porgera Gold Mine through BNL changed to an indirect 24.5% interest in the Porgera Gold Mine through PJL. On December 22, 2023, BNL and NPL signed a confirmation of completion of the matters under the PPCA, confirming that all conditions for the full resumption of production had been completed and that the resumption of production had been formally initiated. The first batch of gold doré from the Porgera Gold Mine was expected to be produced in the first quarter of 2024 following the resumption of production systems, including mining and processing. With the PPCA becoming fully effective on December 22, 2023, Zijin Mining Group Co., Ltd. and Barrick Gold Corporation lost the joint operation of BNL.