It’s been a bitter-sweet time for Papua New Guinea-focused Kalia.

On one hand, Kalia received the Bougainville government’s blessing for two exploration licences, the first such licences ever to be processed after a moratorium on mining and exploration was lifted in 2015.

Investors loved the news, pushing the stock (ASX:KLH) up 27 per cent to a record high of 2c. It closed at 1.9c.

But Kalia has also been caught up in a stoush over the redevelopment of the controversial Panguna mine on Bougainville Island. (More about that below).

First licences after moratorium

The new licences cover more than 1700 kilometres in the Tore region of Bougainville Island and are highly prospective for gold and copper.

Kalia owns 75 per cent stake of the venture while Toremana Resources – which represents the interests of landowners – owns the remaining stake.

Initial exploration programs will search for potential epithermal mineralisation including volcanic massive sulphides, porphyry intrusives and veining.

Bougainville remains largely under-explored thanks to a moratorium on mining, exploration and development.

The moratorium was lifted when Bougainville passed a new Mining Act in 2015. The two licences after the first to be processed under the Act.

Kalia's share price over the past year. Source: Investing.com
Kalia’s share price over the past year. Source: Investing.com

The Panguna mine issue

The massive 1.5 billion tonne copper and gold Panguna mine lies 60km south-east of Kalia’s licence areas.

It was mothballed by owner Bougainville Copper in 1990 after anger over the mine led to the “Bougainville Crisis”. When operating, it was considered among the richest copper mines in the world.

There are now plans by Bougainville Copper — with the government’s support — to bring it back into production.

Bougainville Copper currently hold the rights to the mine and is undergoing a licensing renewal process.

However, it’s got a fight on its hands. ASX-listed RTG Mining (ASX:RTG) along with a landowner-backed consortium are bidding to redevelop the project and opposes any involvement of Bougainville Copper in rebuilding and operating the mine.

RTG claims the changes to Act saw customary landowners taking ownership of minerals on their lands and therefore landowners own the minerals to the Panguna mine, not Bougainville Copper.

Now Kalia has been named second and third defendants in an action by RTG and its landowner consortium in the Supreme Court of Western Australia.

The matter relates to an alleged breach of a Deed of Settlement regarding activity relating to Panguna.

Kalia says it doesn’t fully understand why legal action has been brought against it, but intends to defend the proceedings away.

Kalia also noted that its licences, which lie 60km away, are not impacted by the legal action.

The company will keep investors informed of developments.

Stockhead is seeking comment from Kalia.

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